To avoid personal liability, an LLC often serves as the general partner of a limited partnership. An LLC provides flexibility like a partnership, plus limited liability like a corporation. Consequently, if your LLC faces a lawsuit, your personal assets are typically protected.
Most LLC members are member managers, not passive investors. The IRS takes action against LLCs incorrectly claiming tax exemptions.
In a general partnership, partners have unlimited personal liability. All partners’ assets can be seized to pay business debts. An LLP registers with the state for limited liability while allowing partnership flexibility.
LLCs can technically be general partners. But regulations vary, with restrictions in some states and industries allowing only licensed professionals as general partners. So while legally possible, LLC general partners still face hurdles.