LLPs may appeal to business partners and professionals. The partners in an LLP all share management responsibility and authority over the business—but they are generally not personally liable for the company's debts or for another partner's malpractice. LLPs are often registered by teams of licensed professionals, and in some states, only certain professionals (e.g., lawyers or accountants) are permitted to form LLPs.

Limited liability partnerships are taxed as “pass-through entities,” which means the profit and loss is passed through to the individual partners, who are accountable for the income on their personal tax returns. The LLP entity doesn't pay separate income tax, but some states levy an annual franchise tax on the partnership.

An LLP (a “limited liability partnership”) and an LLC (a “limited liability company”) have similar names but they are different business structures. An LLP must have at least two partners, while an LLC can have a single member who owns the entire business. Also, some instances some licensed professionals aren't allowed to form an LLC, so operating through an LLP gives these professionals personal liability protection. It's generally easier to transfer ownership in an LLC, and the company's day-to-day affairs can be handled by designated managers. In an LLP, all partners have management authority.