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 (Tran et al., 2020). On the other hand, a C corporation is under the U.S. income tax law defined as a partnership in which the members are taxed separately from the organization (Dogru, 2017). This paper aims to compare and contrast the advantages and disadvantages of an LLP and a C corporation as well as suggest the tax reasons as to why a new entity would choose an LLP is better over a C corporation. More

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 (Tran et al., 2020; Dogru, 2017). 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 C corporation as it requires a minimum of one and a maximum of three members. Additionally, it is expensive to start a C corporation than to start a limited liability partnership (Tran et al., 2020; Dogru, 2017). 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. Limited Liability Partnership

The most significant tax reason why a new entity would prefer an LLP over a C partnership is double taxation (Tran et al., 2020; Dogru, 2017). This is because the profits of a C corporation are taxed at the corporate and personal levels.

References

Dogru, T. (2017). C-corporation Hotels vs. Hotel-REITs: A theoretical and practical comparison. Boston Hospitality Review, 5(1).

Tran, Y. L., Siry, J. P., Izlar, R. L., & Harris, T. G. (2020). Motivations, business structures, and management intentions of large family forest landowners: A case study in the US South. Forest Policy and Economics, 118, 102244.