LLP or LLC

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LLP or LLC

My friend and I are in the process of putting together a business plan to pursue opening an event hall. This event hall will be used for a space for people to rent for birthday parties, small wedding receptions, baby showers, etc. The business will be a joint partnership with everything done 50/50. In doing our research, we were wondering if we should register the business as LLC or LLP?

Asked on November 7, 2017 under Business Law, Ohio

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 4 years ago | Contributor

An LLC is the better choice. A limited liability company is a simple to set-up and operate business organiztion which provides strong protection for you and your personal assets (e.g. house; money in your own bank account) from any business-related liability or obligations apart from obligations your personally guaranty or "fiduciary" tax debts (payroll or sales taxesu owed to the government). You can select "pass through" or "disregarded entity"  status when setting up the LLC, to avoid double "corporate" taxation and be able to take advantage of any tax losses on your personal returns.
Before setting it up, think about how want to handle certain contingencies if they arise--e.g. what if one of you wants to be bought out? Does the other one have to buy his/her partner out? If so, for what amount? Etc. Think through those issues and put instructions for them into the "operating agreement" you will create for the LLC, to guide you in the future.


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