Limited Liability Partnership In Depth
A limited liability partnership, or LLP, is a specific kind of partnership designed to set up partners with limited liability. The exact terms of a limited liability partnership will vary depending upon the rules of the nation and state in which it is being formed since, in some jurisdictions, an LLP must conform to certain rules.
The main point of a limited liability partnership is to ensure that some partners do not have unlimited liability to the partnership such that if the partnership incurs debts, those partners cannot be held fully accountable for payment. They can only be held accountable to a certain extent if they have limited liability. Thus, a limited liability partnership would protect the partners within the partnership.
A limited liability partnership will vary in its rules depending upon its location, but in general, a limited liability partnership need only involve a single limited liability partner to be considered an LLP. In many instances, however, an LLP might be made up wholly of limited partners who are protected from full liability to the partnership. This is significant because of the difference between a limited liability partnership and a limited partnership.
An LLP, by definition, is made up of both limited partners and at least one general partner. As a result, a limited partnership is designed to have a single party to the partnership who has great liability to the partnership, but also great control over the partnership, while all other parties in the limited partnership are both protected and play a passive role within the partnership. Because an LLP would allow all partners to be protected from liability to the partnership, it allows for a more active role on the part of the partners.