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Limited Liability Companies and Limited Liability Partnerships

Learn the similarities and differences between limited liability companies and partnerships.

Limited Liability Company

A Limited Liability Company (LLC) is an unincorporated association that provides limited liability to its owners (members).

Generally, members are not personally liable for an LLC's:

  • Debts
  • Obligations 
  • Liabilities

Members can take part in management and control of the LLC without increasing their personal exposure beyond their contribution to the business.

Like corporations, LLCs are created by:

  • Filing a certificate of organization with the Secretary of the Commonwealth and
  • Paying a fee.

LLCs function under the terms of an operating agreement, a document comparable to a partnership agreement.

LLCs must also file an annual report with the Secretary of the Commonwealth.

See the Secretary of the Commonwealth website for additional information about becoming a LLC.

Limited Liability Partnership

A Limited Liability Partnership (LLP) is a partnership which, by registering with the Secretary of the Commonwealth, limits the personal liability of a partner for:

  • Debts
  • Obligations
  • Liabilities

A partner is also limited in their liabilities whether in tort, contract, or otherwise from omissions, errors, wrongful acts, or negligence. A partner cannot eliminate liability for his own negligence.

LLPs must also file an annual report with the Secretary of the Commonwealth.

See the Secretary of the Commonwealth website for additional information about becoming a LLP.

Classification for Massachusetts Income Tax purposes

LLCs and LLPs are classified for Massachusetts tax purposes the same way they are for federal income tax purposes.

A single member LLC will be disregarded as an entity separate from its owner for Massachusetts income tax purposes, if it is disregarded for federal tax purposes.

An LLP or an LLC with two or more members will be treated as a partnership if its treated as a partnership for federal tax purposes.

An LLP or LLC will be treated as a corporation for Massachusetts income tax purposes if it is classified as such for federal tax purposes.

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