The main difference between an LLC and an LLP is who can use each one and how far the liability protection goes.
A limited liability company (LLC) works for one owner or many, and most states let almost any business form one.
A limited liability partnership (LLP) is a general partnership that registers for liability protection.
It needs at least two partners, and some states reserve it for licensed professionals such as lawyers, accountants, and architects.
Both structures keep business income from being taxed twice, and both can shield your personal assets in some situations.
The gaps show up in the details: who the shield covers, which states allow the structure, how much paperwork it needs, and what happens when a partner makes a mistake.
This guide covers each one so you can match the structure to your business. Facts below carry a source and a date, and state rules change, so confirm the details with your state's business office before you file.
An LLC is a business structure that separates you from your company. If the business gets sued or can't pay a debt, creditors generally go after the company's assets, not your house or savings.
The U.S. Small Business Administration puts it this way: "LLCs protect you from personal liability in most instances" (SBA, choose a business structure, page updated August 28, 2026). The SBA also lists LLC ownership as one or more people.
LLCs have a loose structure. Owners, called members, can run the company themselves or hire managers.
They can split profits in whatever proportions they agree on in an operating agreement, and they aren't required to hold the formal meetings that corporations do.
The IRS classifies a domestic LLC by its number of members. With two or more members, it is taxed as a partnership by default.
With one member, it is treated as separate from its owner for income tax purposes, though it still counts as a separate entity for employment taxes and certain excise taxes.
An LLC can also file Form 8832 to choose corporate tax treatment instead (IRS, limited liability company page, reviewed October 10, 2026).
The SBA adds that LLC members count as self-employed and owe self-employment tax toward Medicare and Social Security, which surprises many first-time owners.
An LLP is a general partnership that files with the state to gain liability protection.
Instead of forming a new kind of company from scratch, two or more partners register their existing partnership as an LLP.
The SBA explains that an LLP "protects each partner from debts against the partnership" and that partners aren't responsible for one another's actions.
That second point is the heart of the LLP. In a regular general partnership, every partner can be personally liable for what the others do.
An LLP removes most of that risk, which is why professional firms adopted it. According to the Journal of Accountancy, the AICPA changed its Rule 505 in 1992 to let accountants practice through LLCs and LLPs after years of heavy litigation.
That article dates from September 2005, so use it for background and check your state's current statute for the details.
Not every LLP gives the same protection. States fall into two groups, according to that article:
In both cases, you remain responsible for your own mistakes. Neither shield covers criminal acts, and courts can set aside a shield in some cases.
Rules vary by state. LegalZoom's business glossary notes that some states allow LLPs only for licensed professionals, such as law, accounting, and architecture or engineering firms.
A Wolters Kluwer page names California and New York as states that restrict LLPs to professionals.
The same page says Delaware and Texas are among the states that require insurance or an escrow account to cover liabilities.
Treat these as starting points and read your state's statute or call the Secretary of State, since the official state pages could not be checked for this article.
An LLP is a pass-through entity. The IRS says a partnership files Form 1065, pays no income tax itself, and passes profits and losses to the partners, who report their shares on their own returns.
The partnership gives each partner a Schedule K-1. Partners aren't employees, so they don't receive a W-2, and partners with self-employment income file Schedule SE and may make estimated tax payments (IRS, partnerships page, reviewed June 8, 2026).
|
Factor |
LLC |
LLP |
|
Number of owners |
One or more |
Two or more |
|
Who can form one |
Most businesses in every state |
Often limited to licensed professionals, depending on the state |
|
Protection from other owners' mistakes |
Generally yes, though rules vary |
Yes, the core purpose |
|
Protection from business debts |
Generally yes |
Depends on the state (full or partial shield) |
|
Default federal tax treatment |
Single member: disregarded entity. Multiple members: partnership |
Partnership |
|
Tax election options |
Can elect corporate treatment with Form 8832 |
Follows partnership rules, so check options with a tax professional |
|
Management style |
Flexible, member-managed or manager-managed |
Partners usually share management under a partnership agreement |
|
Governing document |
Operating agreement |
Partnership agreement |
|
Typical users |
Freelancers, online sellers, small firms, real estate investors |
Law, accounting, architecture, and similar practices |
|
Ongoing paperwork |
Annual reports and fees vary by state |
Annual reports and renewals are typical, and a lapse can cost you your status |
Think of a two-partner accounting firm. One partner makes a costly error on a client's filing, and the client wins a judgment that exceeds the firm's assets.
In an LLP, the other partner is generally protected from that judgment as long as she wasn't involved.
A single-member LLC doesn't apply here at all, because there is no second owner to protect you from.
In a multi-member LLC, protection from a co-owner's professional errors can depend on your state's law and on whether the LLC is a professional one, so professionals in an LLC should ask an attorney how their state treats this.
Now flip the example. The firm owes $250,000 on an office lease and can't pay. Under a full-shield LLP or an LLC, the partners' personal assets are generally safe from that debt.
Under a partial-shield LLP, the partners could be personally liable. That is why the "full" or "partial" label matters more than the entity name.
Also watch the paperwork. LegalZoom's glossary warns that missing an annual report can cause an LLP to lose its status, which exposes partners to unlimited personal liability.
Mark every renewal date in your calendar.
Most people expect a big tax gap between the two. In practice, a multi-member LLC and an LLP both default to partnership taxation, so the forms look nearly identical:
Form 1065 for the entity, Schedule K-1 for each owner, and self-employment tax on active owners' earnings.
The real tax difference is flexibility. An LLC can file Form 8832 to be taxed as a corporation, which some owners explore once profits grow.
An LLP is a partnership by design. If tax planning drives your decision, a CPA can model both paths with your actual numbers.
Forming either entity means filing with your state, paying a fee, and naming a registered agent. The SBA says an LLC's registration cost is typically under $300, though it varies by state.
LLP fees and annual costs differ by state, and current figures from official state pages were not available for this article, so look up your state's fee schedule.
If you choose an LLC, a formation service can handle the paperwork. Tailor Brands advertises LLC formation "for as little as $0 + state fees," and its cost page (updated August 13, 2026) lists state filing fees from $35 in Montana to $520 in Massachusetts including a $20 expedited fee.
Its registered agent service runs $199 to $400 per year if you want one. For current plans and add-ons, see the Tailor Brands cost page, and compare year-two renewals as well as the first-year price.
Keep in mind that the Tailor Brands page reviewed for this article covers LLC formation, so confirm directly whether it files LLPs before you plan around it.
Often, yes, but the rules depend on the state and the structure involved. Some states let partnerships convert to LLCs, and the reverse may also be possible.
Conversions can trigger filings, new registered agent paperwork, and tax questions, so it's cheaper to pick the right structure at the start.
If you want to see how one provider handles the LLC side of this, read this Tailor Brands platform review before you decide whether to use a formation service.
- Also Read: LLC vs LLP Guide for Business Owners
No. Both limit personal liability, but an LLC can have one owner and is available to most businesses, while an LLP needs at least two partners and is often limited to licensed professionals.
It depends on your state. The SBA says LLC registration is typically under $300. LLP costs vary by state, and some states add insurance or escrow requirements for LLPs, so check the state's fee schedule.
No. The SBA's comparison lists partnerships, including LLPs, as structures for two or more people. A solo owner who wants liability protection usually forms an LLC.
By default, a multi-member LLC and an LLP are both taxed as partnerships, so profits pass through to the owners' personal returns. A single-member LLC is disregarded for income tax, and an LLC can elect corporate treatment.
No. In both full-shield and partial-shield states, you stay liable for your own malpractice or misconduct. The protection covers other partners' mistakes and, in some states, the firm's business debts.
For a simple business, many owners choose an LLC without one. If you're in a licensed profession or have partners, an attorney can explain your state's rules, and a CPA can explain the tax side.
Choose an LLC if you want a flexible structure that works for solo owners and groups in nearly any industry.
Consider an LLP if you're a licensed professional with partners and your state allows it, especially in a full-shield state.
Before you file, check three things: whether your state allows the structure for your profession, whether its liability shield is full or partial, and what annual filings keep that protection in place.