Differences between LLC and LLP

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XianghuiKong

August 15, 2023 20:32

Hi, guy. Could anyone kindly clarify the differences between LLP and LLC for me? Why the attached question choice A is not correct?

-Personal Liability

- Protection from one partner from claims made against the other

-Taxation 

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  mermann August 16, 2023 10:19

  LLC can be an individual or a partnership where all the owners are OPERATING the business (like here)…LLP is structured with TWO TIERS of ownership, one operating the business and one (with less legal exposure) for silent partners who are INVESTORS in the firm. So if your architecture colleagues and you join together to create and run a firm and you are negligent such that a preschool collapses you (as an LLC partnership) have more legal exposure than if you as a successful filmmaker invests in your grandson’s architecture firm as a silent partner (LLP) and the preschool (which you had nothing to do with the design of) collapses.—Michael Ermann, Amber Book creator

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  XianghuiKong August 17, 2023 01:42

   Thank you so much, Michael!

  Love the example you give, which is so clear and easily-understood. 

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