Question: A partnership that combines the advantages of the partnership and the corporation, while avoiding their disadvantages, is called a limited liability partnership (LLP). At least two members, or partners, are necessary to form an LLP. The primary advantage of the LLP is that it does not pay separate income tax. LLP partners allocate profits and losses among themselves, according to the partnership agreement. All members in the LLP have "limited" liability for the debts of the business. This means that none of the personal assets of the members are subject to the claims of business creditors. The LLP follows partnership rules for dissolution. If one member drops out, all others must formally agree to continue the business. Many major accounting firms have changed to the LLP form of business organization in an effort to limit the costs associated with malpractice liability
Critical Thinking
1. What other professions might organize as LLPs to limit the costs associated with malpractice liability?