Definition

A limited liability partnership is a type of business entity that is similar to a partnership except tat the liability of the partners is limited to the amount of their equity in the partnership. All partners can be involved in making business decisions and running the partnership . The owners are natural persons.

Advantages

  • Liability of each partner is limited to that partner's equity in the partnership.
  • Losses incurred can be applied against the owner’s other income which will reduce the owners income taxes.
  • Separate tax returns are required depending on the number and makeup of the partners.

Disadvantages

  • Complicated legal agreements to set up.
  • The tax rate of the business is the same as that of the owners. Any income earned by the business is taxed at the marginal rate of the owners based on their share of the income.