The structure of a business is more than just a critical element; it is what dictates nearly every aspect of the business. Sadly, too many business owners fail to give the decision of how to structure their business enough thought, which can place them and their partners and investors at risk for legal and financial consequences. Discover how even the smallest of differences in structure, such as those seen in limited liability partnerships (LLP) and limited liability companies (LLC), can make all the difference in the future stability of your company, and learn how an experienced Illinois business law attorney can assist you in making the right decision for your company's needs.
Examining the Similarities Between LLPs and LLCs
For the most part, LLPs and LLCs are formed, structured, and treated the same. Each provides the partners with a "pass-through" option on their taxes, which allows them to avoid the "double taxation" that corporations are required to pay. LLCs and LLPs also handle partner buy-in and sell-out in a similar fashion, and neither has a limit on the number of partners that the business can have. Because of this, LLPs and LLCs have become quite popular among businesses that might have otherwise been forced to register as a corporation.
Understanding the Differences Between LLPs and LLCs
Although there are many similarities between LLPs and LLCs, there are also some distinct and important differences. First, an LLC does not offer partners the same level of liability protection as an LLP, should a lawsuit or some other legal action take place. Instead, all partners may be held equally accountable in an LLC. In contrast, an LLP is only required to have one managerial partner. All others can receive protection from the actions of managerial partners, provided they do not take on a managerial role themselves.
Business owners should also understand that they cannot always structure the company however they want. Some states have specific restrictions. For example, Illinois does not permit banking or insurance institutions to form LLCs. Instead, they must structure as either a corporation or an LLP.
Contact Our Wheaton Business Law Attorneys
At Stock, Carlson, Oldfield & McGrath, LLC, we understand the difficult decisions that start-up businesses must make, such as those that pertain to business structure. Dedicated and experienced, our Wheaton business law attorneys can assist you and your partners in making the most sensible choice for your company. Call 630-665-2500 and schedule your personalized consultation today.