LLP, or Limited Liability Partnership, is a business partnership where partners' liability in the company is limited to the amount of their investment into the company. The partners are also not liable for some acts of the other partners in the business. State laws vary on the formation of LLPs, and many states make it a requirement to purchase liability insurance to cover any possible claims against the LLP. Many states also limit the formation of an LLP to professionals, such as architects, lawyers, health care professionals and accountants.
The partners of an LLP each share in the debts and profits of the business, instead of the business carrying them independently, and they are each taxed as co-owners, based on their share of the company. This is instead of each partner incurring dual taxation--one from the business and then one from their profits or income.
Another advantage to filing a business as an LLP is that the partners are protected, to some degree, from the acts of their employees or other personnel. The LLP acts as a screen to the personal assets of its partners or co-owners.
The partners of an LLP have to equally agree to sell any of its assets, because their share in the company is their personal property, and the asset sale does not sell away their interest as partners.
An advantage to formulating an LLP over a corporation is that since it is co-owned by its partners, there is not need for the standard corporate practices, such conducting annual meetings on the company's financial statements and overall business status.
Any revenue or property gain made to or by the LLP belongs directly to the LLP and not to the individual partners or co-owners. Therefore, specific agreements have to be drafted to allow for returns or individual benefits from these contributions made to the LLP.