How does a limited liability partnership differ from a general partnership?

A limited liability partnership (LLP) is characterized by the fact that some partners have limited liabilities, protecting them from personal debts incurred by the partnership beyond their initial investment. This is in stark contrast to a general partnership, where all partners typically share equal responsibility for the debts and liabilities of the business. In a general partnership, all partners are general partners and can be held liable for the actions of the partnership as well as for the obligations incurred by their partners.

The correct answer highlights that in an LLP, all partners may not share the same level of liability; instead, some are designated as limited partners who enjoy protection from personal liability, thus allowing for a distinction in responsibility and legal exposure among partners. This structure makes LLPs attractive for professional practices, where individuals want to limit their risk while still participating in the management of the business.

In addition, a limited liability partnership does not specify a minimum or maximum number of partners as a defining characteristic; hence, having more than three partners or exclusivity to one individual does not differentiate an LLP from a general partnership. Thus, the key distinctive factor remains the limited liability offered to certain partners in the LLP setup.