LP and LLP are two kinds of topics that are related to business. Here, LP and LLP denote the partnership system that is seen between two or more teams by tying up for the same purpose.
The partnership helps grow the business faster as it is flexible enough, and people tend to help each other.
Key Takeaways
- LPs consist of general partners with unlimited liability and limited partners with liability capped at their investment.
- LLPs offer limited liability protection for all partners, shielding them from the debts and actions of the partnership.
- LLPs require registration with the state and adherence to specific regulations, while LPs have fewer compliance requirements.
LP vs LLP
A limited partnership, or LP, is a type of partnership in which one or more partners have limited liability for the partnership’s debts while another member has unlimited liability. A limited liability partnership, or LLP, is a type of partnership in which all partners have limited liability for the partnership’s debts.
LP is the abbreviation for the terms Limited Partnership. The LP system has two collective partners and the general partners are the head partner, and the rest members are the limited partners.
This type of partnership system came into force many years ago and became extremely popular in the years between the 1970s to 1980s.
On the other hand, LLP is the abbreviation for the terms Limited Liability Partnership. LLP partnership allows every member to take an equal part in the company’s management processes, and these partners are known as limited partners.
Therefore, there is no general partner. This type of partnership system came into force a few years ago, and hence it is comparatively new. And also, it became extremely popular during the 1990s.
Comparison Table
| Parameters of Comparison | LP | LLP |
|---|---|---|
| Definition | The partnership system where the whole authority is controlled and looked after by the general partner and the limited partner is the silent partner is known as LP. | The partnership system where the whole authority is under the sole control of all the members present in the team is known as LLP. |
| General Partner | In LP, there is a general partner. | In LLP, there is no general partner and therefore all the members are called the limited partners. |
| Abbreviation | LP is the abbreviation for the terms Limited Partnership. | LLP is the abbreviation for the terms Limited Liability Partnership. |
| Existence | LP system came a bit earlier than LLP and hence it is comparatively older. | LLP system came into force recently and hence it is comparatively newer than LP. |
| Popularity | LP system became popular between the years the 1970s to 1980s. | LLP systems became popular during the 1990s. |
| Structure | The general partner in the Limited Partnership manages and takes decisions for the company and the limited partner does not participate in such kinds of activities. | All the members of the Limited Liability Partnership are responsible and together take the decisions for the company. |
| Liability | In LP, the general partner enjoys unlimited liabilities and the limited partner enjoys the limited liabilities for the company’s loans and losses. | In LLP, all the members of the partnership particularly enjoy the limited liabilities for the company. |
| Profession | LP can form its margins in any kind of business. | There are certain limitations for LLP, and therefore this type of partnership can only be used by the professionals such as Architects, Accounts, etc. |
| Tax | In LP, the general partner is only responsible to pay off the self-employment taxes and the limited partners are free from the taxes. | In LLP, each partner is responsible for paying the amount for the taxes as per their share in the company. |
What is LP?
Businesses require or have partnerships with other related persons so that the burden upon a single person eases out, and hence together, they can run the same business more efficiently.
In the LP system, there are mainly two major roles of the partners: the general partner and the limited partner. And the partnership system where both generals and limited partners are present is known as LP.
LP is the abbreviation for the terms Limited Partnership.
This system came into force many years ago, and later in the years between the 1970s to 1980s, it became very popular amongst the business industries.
As we know, there are mainly two types of partners in Limited Partnership, and hence the job of each partner is different from each other.
The general partner is associated with the main jobs, and the limited partners are associated with the supporting characters.
Also, the general partner is associated with various unlimited liabilities. On the other side, the limited partner is associated only with the limited liabilities for the company’s loans and losses.
And hence the company is solely run by the general partners. And during the time of paying the taxes, only the general partner is capable of paying the taxes, and on the other hand, the limited partner is free from such kinds of taxes.
What is LLP?
LLP is the abbreviation for the terms Limited Liability Partnership. LLP is such a kind of partnership system where each member of the partnership system enjoys an equal amount of advantages as well as disadvantages.
The partners in an LLP are known as limited partners. Here, there is no presence of the general partner; therefore, all the members get equal status.
The partner collectively takes all the decisions from minor to major; hence, this system resembles a great example of teamwork.
This LLP system was recently established in its roots and became popular during the years of 1990s. Also, in LLP, the limited partners are only benefited from the limited liabilities of the company.
Even though this is a highly efficient system of partnership but there are certain professional limitations as well.
This type of partnership can only be used by professionals such as Architects, Accounts, etc.; others might face some problems with such kind of partnership system.
In LLP, each partner is responsible for paying the amount of the taxes as per their share in the company.
As we know, all the decisions or responsibilities are equally divided amongst the people of this system, similarly, at the time of paying the taxes, each individual pays their taxes according to the share of the company, and therefore in this way, everything is maintained properly.
Main Difference Between LP and LLP
- The partnership system is where the whole authority is controlled and looked after by the general partner, and the limited partner is the silent partner known as LP. On the other hand, the partnership system where the whole authority is under the sole control of all the members present in the team is known as LLP.
- In LP, there is a general partner. On the other hand, in LLP, there is no general partner; therefore, all the members are called limited partners.
- LP is the abbreviation for the terms Limited Partnership. On the other hand, LLP is the abbreviation for the terms Limited Liability Partnership.
- LP system came a bit earlier than LLP, and hence it is comparatively older. On the other hand, the LLP system came into force recently, and hence it is comparatively newer than LP.
- LP system became popular between the years 1970s to 1980s. On the other hand, LLP systems became popular during the 1990s.
- The general partner in the Limited Partnership manages and takes decisions for the company, and the limited partner does not participate in such kinds of activities. On the other hand, all the members of the Limited Liability Partnership are responsible and together take the decisions for the company.
- In LP, the general partner enjoys unlimited liabilities, and the limited partner enjoys limited liabilities for the company’s loans and losses. On the other hand, in LLP, all the members of the partnership particularly enjoy the limited liabilities for the company.
- LP can form its margins in any business. On the other hand, there are certain limitations for LLP; therefore, this type of partnership can only be used by professionals such as Architects, Accounts, etc.
- In LP, the general partner is only responsible for paying off the self-employment taxes, and the limited partners are free from the taxes. On the other hand, in LLP, each partner is responsible for paying the amount for the taxes as per their share in the company.
- https://onlinelibrary.wiley.com/doi/abs/10.1038/oby.2003.63
- https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1365-2230.1993.tb02211.x
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This article provides a comprehensive and detailed overview of LP and LLP partnership systems, as well as their differences. It is very informative and enlightening.
The explanation of tax responsibilities in both LP and LLP is very clear and insightful.
The article effectively highlights the fundamental differences between LP and LLP partnership structures, making it easy for readers to comprehend.
I believe that the professional limitations of LLP should be further elaborated upon to provide a more thorough understanding of the system.
The historical context provided for both LP and LLP is quite interesting and helps place them in their respective timelines.
The comparison table is very useful in understanding the key differences between LP and LLP.