Limited Liability Partnership (LLP)
A Limited Liability Partnership (LLP) is a specific type of partnership that provides its partners with limited personal liability for the debts and obligations of the partnership. This structure is designed to protect individual partners from being personally liable for the negligence or misconduct of other partners, thereby limiting their financial risk.
In an LLP, each partner enjoys the benefits of limited liability, which means that their personal assets are generally safeguarded from claims against the partnership. However, partners remain personally liable for their own wrongful acts or omissions. This makes the LLP an attractive option for professional groups, such as law firms, accounting firms, and medical practices, where individual liability protection is crucial.
For example, in a traditional general partnership, if one partner makes a mistake that results in a lawsuit, all partners could be held liable for the entire amount of the judgment, regardless of their personal involvement. Conversely, in an LLP, if one partner is found liable for malpractice, only that partner’s personal assets are at risk, while the other partners’ assets are protected.
Additionally, an LLP often allows for flexible management structures, enabling partners to determine their roles and responsibilities without the rigid hierarchy found in corporations. This flexibility, combined with liability protection, makes LLPs an appealing choice for many professional service providers looking to collaborate while managing risks effectively.