General Definition: A Limited Liability Partnership (LLP) is like a General Partnership, where all partners are given a right to control the entity. However, unlike a General Partnership, a LLP provides each partner with limited liability. In most states, LLPs are only available to a select group of professions, such as law and accounting firms. Learn more from Startup Legal:
Piercing the LLP Veil: In certain limited instances, creditors or litigants can attempt to impose personal liability on principals in a LLP by claiming that the LLP is a sham, a device created merely to defraud creditors, or is being run as a sole proprietorship (e.g. the LLP has not been properly formed or there has been a commingling of corporate and individual property). The process of imposing individual and personal liability is referred to as “piercing the corporate (or in this case ‘partnership’) veil” or “disregarding the corporate entity.” Ordinarily, a party seeking to pierce the partnership veil will have a heavy burden in attempting to persuade the courts to disregard the partnership entity.
Meetings: Meetings may be required depending upon state law. Meetings may also be required by the Limited Liability Partnership Agreement created by the Limited Liability Partners.
Member Reports: Partners are entitled to call for an accounting or inspect the financials of the Limited Liability Partnership. Depending on state law, they may also be entitled to annual reports.
State Formalities: Many states require Limited Liability Partnerships to file annual (in some states biannual) reports with the state, updating the general information concerning the Limited Liability Partnership and its partners.
Profits from a Limited Liability Partnership pass through to Limited Liability Partners without being taxed at the entity level. However, a Limited Partnership will have to file an annual report with the IRS stating how much the each member earned or lost.
In many states, a Limited Partnership will still be subject to a minimal franchise tax, much like an LLC or S Corporation.