What are the merits and demerits of LLPs?  As discussed in the textbook, large accounting firms and other professional firms operate as limited liability partnerships (LLPs). Compare and contrast the advantages and disadvantages of an LLP form of business and a C Corporation. Suggest the significant tax reasons why a new entity would choose an LLP over a traditional partnership or a C Corporation. A limited liability partnership (LLP) is one in which some or all partners have limited liability. Therefore, a limited liability partnership exhibits both the elements of a partnership and those of a corporation. On the other hand, a Corporation is under the U.S. income tax law defined as a partnership in which the members are taxed separately from the organization.

Limited Liability Partnership Vs C Corporation

The two forms of business have similarities and differences in their advantages and disadvantages. First, both an LLP and a C corporation provide shareholders with limited liability in the event of loss in business. Additionally, both remain in operation even after the original owners leave or die. However, to form an LLP, a minimum of two members are needed. This is different from a Corporation as it requires a minimum of one
and a maximum of three members. Additionally, it is expensive to start a Corporation than to start a limited liability partnership. This is because many fees need to be paid when filing articles of incorporation. Moreover, a C corporation issues stock options and transfer shares to employees and top management while an LLP does not. The most significant tax reason why a new entity would prefer an LLP over a C
partnership is double taxation. This is because the profits of a C
corporation are taxed at the corporate and personal levels. APA style