Limited Liability or Limited Partnership: Which is Better?:- Real estate investors know how important it is to protect their assets against legal claims. We certainly live in a rather litigious society and there are those unfortunate individuals who will file a lawsuit at the drop of a hat, legitimate or not. forming a partnership

Regardless, any business and any individual can be exposed to lawsuits and without liability protection; those hard earned assets could be turned over to a winning plaintiff. Two popular choices for to protect against claims is a Limited Partnership and Limited Liability Partnership. What are the differences?

Unlike a general partnership, a limited partnership (LP) and a limited liability partnership (LLP) offers asset protection against legal claims for the individuals in the partnership. In an LP, there is at least one of the owners that act as a general manager. An LP identifies one or more partners to carry on the daily business activities of the partnership.

Offers are made, properties rehabilitated, sold and managed under the auspices of the LP. An LP also has “silent” partners who are members that help capitalize the business, these are the “limited” partners who are not involved in day to day business affairs only but one of the financiers. In an LP, the limited partners are not held liable for the business activities of the business, are not responsible for debts incurred or business losses. The general partner in an LP is however liable.

In an LLP, the business is operated in a similar fashion as an LP yet there is no general partner or partners that manage the business, and is run by whomever the partners select and all of the registered partners are provided limited liability protection.

Which is better for you? With any business entity evaluation you should consult both your attorney and accountant, as both will provide valuable input. Regardless of either choice, operating daily as a sole proprietorship with no liability protection is a poor choice. You work hard to build your business and add to your real estate portfolio; don’t leave it vulnerable.