An LLC (limited liability company) can have one owner or many and is open to almost any business, while an LLP (limited liability partnership) needs at least two partners and, in many states, is limited to licensed professionals such as lawyers, accountants, and architects.
Both can protect owners from certain business debts, but the details differ. In an LLP, partners generally aren't responsible for each other's mistakes, yet each partner stays liable for their own.
For most small businesses, an LLC is the simpler and more widely available choice.
If you decide to form one, comparing the best LLC registration services can help you evaluate filing assistance, pricing, registered agent services, and ongoing compliance support before choosing a provider.
This guide compares the two on liability, who can form one, taxes, costs, paperwork, and management.
It draws on the SBA, the IRS, NerdWallet, Nolo, CorpNet, and Delaware's Division of Corporations, with dates where the pages gave them.
State rules for LLPs vary a lot, several state pages didn't load, and a few sources disagree. Check your own state's filing office, and ask an attorney or CPA before you pick.
The Short Answer
| # | LLC | LLP |
|---|---|---|
| Number of owners | One or more | Two or more partners |
| Who can form one | Most businesses | Varies by state; some states limit it to licensed professionals |
| Liability | Owners are generally shielded from business debts, with limits | Partners are generally not liable for other partners' acts, but they stay liable for their own |
| Default taxes | Single member: disregarded. Multiple members: partnership | Partnership-style pass-through |
| Management | Flexible | Partners usually share management |
| Best for | Most small businesses | Professional firms |
What Is an LLC?
The SBA (page last modified August 28, 2026) says an LLC "combines features of corporations and partnerships."
The SBA also says LLCs "protect you from personal liability in most instances," so personal assets such as a home or savings are generally safe if the business faces a lawsuit or bankruptcy.
The protection has limits. You remain responsible for your own wrongdoing and for anything you personally guarantee, and courts can ignore the LLC if you mix personal and business money.
The IRS says a domestic LLC with two or more members is treated as a partnership by default, a single-member LLC is disregarded as separate from its owner for income tax, and either can elect corporate treatment on Form 8832 (IRS, page reviewed October 10, 2026).
The SBA adds that profits and losses can pass through to your personal income and that members generally pay self-employment tax.
A single-member LLC is still a separate entity for employment taxes, per the IRS.
What Is an LLP?
NerdWallet (updated March 11, 2026) describes an LLP as a type of general partnership that can limit partners' personal liability for business debts and for other partners' actions.
It's different from a limited partnership, which has a general partner with unlimited liability. The SBA says LLPs "give limited liability to every owner."
Nolo describes an LLP as a business formed by two or more partners, usually licensed professionals, and says Texas was the first state to allow them.
Rules vary by state, so the details below come with a warning to check yours.
Liability: The Biggest Difference
Both structures protect you, but in different ways.
- LLC: Owners are generally shielded from the company's debts and lawsuits. You still answer for your own wrongful acts, personal guarantees, and for ignoring the LLC's formalities.
- LLP: Partners are generally not personally responsible for claims caused by other partners' negligence or misconduct.
- NerdWallet says protection doesn't cover a partner's own professional activities, so partners remain liable for their own wrongful acts, including malpractice.
- Nolo adds that protection falls on a spectrum that differs by state, including for employees' actions.
That difference matters for professional firms. Partners in an LLP get protection from a colleague's mistake, but not from their own.
An LLC's protection also has limits, but the model isn't built around shared professional work.
Who Can Form One
An LLC is available to most business types in every state. An LLP is not. Sources agree that rules vary, and they disagree on specifics:
- NerdWallet says that in some states, including California and New York, only certain licensed professionals can form an LLP.
- CorpNet says California, Nevada, New York, and Oregon allow only professionals in specific industries and that partners usually must hold licenses in the same profession.
- Nolo says Texas allows any group, regardless of occupation.
This guide couldn't load the California, New York, or Texas filing offices' LLP pages, so treat those lists as third-party claims.
Check your state's Secretary of State site to see whether your business qualifies.
Taxes
Both structures are usually pass-through for tax. The IRS says a partnership "does not pay" income tax and instead passes profits and losses to its partners, who report their shares on personal returns.
A partnership files Form 1065 and gives each partner a Schedule K-1 (IRS, page reviewed June 8, 2026). Partners aren't employees and don't receive a W-2.
Where the two differ:
- LLC: The default depends on membership. One member is disregarded, and two or more members are a partnership.
- You can elect corporate treatment with Form 8832, and an eligible LLC can elect S corporation status with Form 2553.
- LLP: Because an LLP is a type of general partnership, partnership-style rules generally apply.
- The IRS partnership page didn't mention LLPs, so confirm the details with a CPA.
Members of an LLC and partners in an LLP both generally owe self-employment tax on their share of earnings from the business, per the SBA's description.
If you're weighing a corporate route instead, one outside page covers the C Corp vs. S Corp business structure.
It's an unsigned Google Sites page marked noindex, with no date and a promo link to a coupon-style domain.
Its IRS-based points on S corp limits (100 shareholders, one class of stock) match IRS guidance, but its claims on venture funding and tax deductions should go to a CPA.
Costs
State filing fees differ by structure and state. NerdWallet cites $70 plus a $15 service fee in California and $200 in New York to register an LLP.
Two private fee compilations checked in October 2026 list LLC filing fees of $70 in California and $200 in New York, the same base amounts. LLC fees across states range from $35 in Montana to $500 in Massachusetts.
Ongoing costs can differ more than filing fees:
- LLC: California charges every LLC an $800 annual tax, due by the 15th day of the fourth month after you register (California Franchise Tax Board). Other states charge smaller yearly reports or none.
- LLP: Delaware requires LLPs to file an annual report by June 1 of the following year, per the Division of Corporations. Nolo says Texas requires its LLP annual report by June 1, while California doesn't require one. Nolo's page was undated, so confirm.
- Insurance: NerdWallet says professional liability insurance can be expensive in higher-risk fields, and an LLP may also need general liability and other policies.
The SBA says the total cost to register a business "will be less than $300," though fees vary by state and structure.
Management and Ownership
- LLC: You can run it yourself or choose managers, and you can set ownership shares in an operating agreement. The SBA recommends an operating agreement.
- LLP: Partners generally share in running the business, as in a general partnership.
- Nolo says a partnership agreement isn't filed with the state and isn't required, but it recommends one.
Paperwork and Setup
Forming an LLC means filing articles of organization with your state, appointing a registered agent, and getting an EIN. The SBA says you need a registered agent before you file.
Forming an LLP usually means filing a registration form with the Secretary of State, sometimes by converting an existing general partnership.
Nolo says most states require a registered agent, though Texas doesn't. Names often need an LLP designation, such as "Limited Liability Partnership" in California or Texas, per Nolo.
For both, the IRS says an EIN is free: "You never have to pay a fee for an EIN" (IRS, page updated October 16, 2026).
Domestic companies are also exempt from beneficial ownership reporting under FinCEN's final rule, issued August 11, 2026.
Should you use a formation service?
You can file yourself. If you'd rather hand off the paperwork, services charge on top of the state fee.
ZenBusiness's pricing page (last modified October 20, 2026) lists LLC plans at $0, $199, and $299, and LegalZoom's page lists $0, $249, and $299, all plus state fees.
One outside GitHub page covers a LegalZoom and ZenBusiness pricing comparison.
Its host blocked automated reading, so its contents couldn't be checked for this guide. Use the companies' own pricing pages instead.
Before you buy, read the refund terms. A newsletter post on the Swyft Filings refund says service fees can be refunded within 60 days, state fees can't once submitted, and registered agent fees generally aren't prorated.
It's signed by the newsletter's author and dated September 29, 2026, but it discloses no affiliate relationship and links to a coupon-style domain.
Swyft's own FAQ says only that it will "make it right or refund your fees" if it doesn't form your company correctly, and its full refund page didn't load for us. Confirm the terms on Swyft's site.
Note that many formation services focus on LLCs and corporations.
Check that a service handles LLP registration in your state before you pay, since this guide didn't verify that for any of them.
CorpNet, for one, says it offers LLP filing and lists a 60-day refund promise on its own site.
When an LLC Makes More Sense
- You're a solo owner, since an LLP needs two or more partners.
- You run a typical small business, such as retail, consulting, or e-commerce.
- You want flexible ownership and management.
- Your state restricts LLPs to certain professions and yours isn't one.
- You may want the option of electing S corporation status.
When an LLP May Make Sense
- You're in a licensed profession with at least one co-partner, such as law, accounting, or architecture.
- Your state allows LLPs for your profession.
- You want protection from your partners' mistakes while sharing management.
- You're converting an existing general partnership.
Step-by-Step: Choosing Between Them
- Count your owners. One owner points to an LLC.
- Check your profession. Licensed professionals should see whether their state offers an LLP or a professional version.
- Read your state's rules. Visit the Secretary of State's site for LLC and LLP requirements.
- Compare costs. Add filing fees, yearly reports, taxes, and insurance.
- Plan your taxes. Ask a CPA how each structure works for you.
- Put it in writing. Use an operating agreement or partnership agreement.
- Get your EIN. It's free from the IRS.
Also Read: LLC vs LLP Differences in Liability, Taxes, and Ownership
Common Mistakes to Avoid
- Assuming every state allows LLPs for every business.
- Thinking about an LLP protects you from your own mistakes.
- Skipping a written agreement.
- Forgetting annual reports. Delaware's LLP report is due June 1.
- Paying for a free EIN.
- Ignoring state taxes. California's $800 LLC tax is an example.
- Trusting unsigned comparison pages. Verify details with the state.
Frequently Asked Questions
What is the main difference between an LLC and an LLP?
An LLC can have one or more owners and fits most businesses. An LLP needs at least two partners, and in many states it's limited to licensed professionals. LLP partners generally aren't liable for each other's misconduct but remain liable for their own.
Is an LLP better than an LLC?
Neither is better for everyone. LLCs are simpler and more widely available. LLPs mainly suit professional firms where partners want protection from each other's mistakes.
Can a single person form an LLP?
No. Nolo describes an LLP as formed by two or more partners. A single owner can form an LLC.
Can any business form an LLP?
Not in every state. NerdWallet and CorpNet say some states, including California and New York, limit LLPs to certain licensed professionals. Nolo says Texas allows any group.
Are LLCs and LLPs taxed differently?
Both are usually pass-through. An LLC's default depends on whether it has one member or several, and it can elect corporate treatment. An LLP is a type of partnership. Ask a CPA about your situation.
Do I need an EIN for an LLC or LLP?
Usually yes, and it's free from the IRS.
Do LLCs and LLPs need an annual report?
It depends on the state. Delaware requires LLP annual reports by June 1, and California charges every LLC an $800 annual tax.
Do I have to file a beneficial ownership report?
Under FinCEN's final rule issued August 11, 2026, domestic companies are exempt.
Can I convert a general partnership to an LLP?
Nolo and CorpNet say some states allow it. Check your state's process and fees.
The Bottom Line
Pick an LLC if you have a single owner or run a typical small business. Consider an LLP if you're a licensed professional with a partner in a state that allows it.
Both give partial protection, not a blanket shield, so insurance and good records still matter.
Check your state's rules, compare the yearly costs, and have a CPA or attorney review your choice before you file.
Sources
- SBA, Choose a business structure. Page last modified August 28, 2026.
- IRS, Limited liability company (LLC). Page reviewed October 10, 2026. And IRS, Partnerships. Page reviewed June 8, 2026.
- IRS, Get an employer identification number. Page updated October 16, 2026.
- FinCEN, Beneficial ownership information reporting. August 11, 2026 alert.