Ask Entrepreneur

What Is the Difference Between an LLC and a Partnership?

I'm trying to sort out my options for incorporation, and I'm a bit lost. I'm interested to know the differences between an LLC and a Partnership. And if I register my business as an LLC, can I later change to a partnership?
Opinions expressed by Entrepreneur contributors are their own.

One of the most significant differences between an LLC and a partnership is the ability to limit your liability. An LLC is its own, independent entity, with an existence that is separate from the owners. A partnership is more like a collective of individuals. If an LLC is sued, generally, that doesn’t affect the owners individually. But if a partnership is sued, usually, the partners are named individually. In short, if you’re in a partnership, you and your personal assets are "exposed." That’s not the case with an LLC.

As part of your analysis regarding which is the right type of entity for your business, you’ll want to weigh your risk tolerance for liability, and the extent to which you can withstand a lawsuit "hit." You’ll also want carefully to consider your longer-term goals for the company -- if you want a company you can eventually sell, you’ll need a formal entity, such as an LLC or a corporation. Finally, different entities pay taxes at different rates, so you’ll want to run some pro forma projections to see which tax regime serves you best. A qualified business attorney and a small-business accountant can help you weigh the pros and cons and other issues to reach the decision that’s right for you.

My Queue

There are no Videos in your queue.

Click on the Add to next to any video to save to your queue.

There are no Articles in your queue.

Click on the Add to next to any article to save to your queue.

There are no Podcasts in your queue.

Click on the Add to next to any podcast episode to save to your queue.

You're not following any authors.

Click the Follow button on any author page to keep up with the latest content from your favorite authors.

How This Entrepreneur Built a Powerhouse Talent Management Company With a Soul