A Limited Liability Partnership (LLP) and a limited liability company (L.L.C. or LLC) differ in their legal liabilities and business obligations and have some pros and cons when compared to other business organization structures like corporations, partnerships, and limited partnerships. LLCs are more common in the U.S. and LLPs are more common in the U.K.
In the UK, an LLP is organized by the filing of a registration statement with the office of the state in which is it formed along with the required filing fee. The registration statement must include certain information. Once the statement is filed, no other filings with the state are necessary unless the LLP changes its name or otherwise amends its statement. The same applies to an LLC also. Once organized, there is no requirement that an LLP have a written partnership agreement. However, a written partnership agreement is desirable to document important managerial and financial agreements among the partners. In the USA, LLCs are organized with a document called the "articles of organization", or "the rules of organization" specified publicly by the state; additionally, it is common to have an "operating agreement" privately specified by the members. The operating agreement is a contract among the members of an LLC governing the membership, management, operation and distribution of income of the company.
edit Management Structure
The owners of an LLC are called "Members" instead of "Shareholders". Managing members are the individuals who are responsible for the maintenance, administration and management of the affairs of an LLC. In most states, the managers serve a particular term and report to and serve at the discretion of the members. This may be called a Two Tiered Management structure for LLCs. Two or more individuals, corporations, partnerships, trusts, or other entities can join together to engage in business as an LLP. The owners of an LLP are called "partners." Partners essentially own the LLP in much the same way as partners own a general partnership and shareholders own a corporation. When an LLP engages in business activities, it is the LLP itself which actually owns and operates the business from a legal sense. Both follow a decentralized form of management.
An LLP in UK provides its partners with limited personal liability for the obligations of the business. Of course, if a business operated by an LLP has financial difficulties, each partner of the LLP could lose the amount of his or her investment in the LLP, as well as the equity built up in the business. Beyond this, however, no partner risks the loss of his or her other personal assets and income. In a US LLC, Limited liability means that the owners of the LLC, called "members," are protected from some liability for acts and debts of the LLC, but can held socially responsible for other obligations. LLCs in most states are treated as entities separate from their members, whereas in other jurisdictions case law has developed deciding LLCs are not considered to have separate juridical standing from their members. To sum it, the liability shield of LLC is broader than that of LLP. This is so because LLCs do not make their members liable for any monetary debts of the company while a member of a LLP may be help responsible for monetary debts.
Pass through Taxation structure is followed by the LLCs in the US. An LLC can elect to be taxed as a sole proprietor, partnership, S corporation or C corporation, providing much flexibility. There is no double tax structure for LLCs unless they want to be taxed as a Corporation. UK based LLPs normally are treated as partnerships for tax purposes. LLPs must elect to be taxed as regular corporations.
Though LLCs also do not follow too many formalities for setting up and running but an LLP requires even lesser formalities. Also, a transfer of real estate to an LLP is exempt from the real estate transfer fee.
edit Further Reading
There are some good books available on Amazon.com for further reading: