Definitions
Limited Liability Company
The IRS defines an LLC as “an entity formed under state law by filing articles of organization.” An LLC limits its owners’ -- called "members" -- liability while also providing flexibility in management and taxation
Limited Liability Partnership
On the other hand, the IRS defines an LLP as a business entity “formed under a state limited liability partnership law.” Partners in an LLP are not typically liable for the debts or negligent acts of another partner.
Management
Limited Liability Company
Members in an LLC have two options for setting the company’s management structure: they can manage the company themselves, or hire or appoint outside managers with no ownership stake in the company.
Limited Liability Partnership
In an LLP, the partners manage the affairs of the partnership. If LLC members elect to manage the company, they typically then manage the company the same way LLP partners manage the company, with partners having voting rights based on their contribution to the company.
Taxation
Limited Liability Company
LLCs can either be taxed like a partnership or like a corporation. Because the IRS has no specific tax classification for LLCs, multi-member LLCs are automatically taxed as partnerships. LLCs can have only one member. A single-member LLC may be taxed as a sole proprietorship or a corporation.
Limited Liability Partnership
LLPs are taxed as partnerships where the profits and losses from the business must be reported on the partners’ personal income taxes. LLPs must have at least two partners.
Liability
Limited Liability Company
Members of an LLC cannot usually be held liable for the debts or liability of the LLC. This protection is typically referred to as the “corporate veil” or “corporate shield.” However, in some cases -- usually involving fraud or deception -- LLC members can be personally liable for the acts of the LLC.
Limited Liability Partnership
In contrast, LLPs limit the liability from one partner to another. In other words, each partner is not liable for the debts or negligent acts -- should a partner be sued -- of the other partner. This liability protection is often suited for lawyers, doctors and accountants where one partner wants protection from any potential malpractice another partner may commit. LLP partners, however, are generally liable for the contracts and debts that the LLP itself enters into.