There are five different entity types for partnerships: general partnerships, limited partnerships, limited liability partnerships (LLP), limited liability companies (LLC), and foreign partnerships. Below is an explanation of each type of partnership to assist you in choosing the appropriate entity type.
General partnership – a general partnership is composed only of general partners.
Limited partnership – a limited partnership is formed under a state limited partnership law and composed of at least one general partner and one or more limited partners.
Limited liability partnership (LLP) – A limited liability partnership (LLP) is formed under a state limited liability partnership law. Generally, a partner in an LLP is not personally liable for the debts of the LLP or any other partner, nor is a partner liable for the acts or omissions of any other partner, solely by reason of being a partner.
Limited liability company (LLC) - A limited liability company (LLC) is an entity formed under state law by filing articles of organization as an LLC. Unlike a partnership, none of the members of an LLC are personally liable for its debts. An LLC may be classified for federal income tax purposes as a partnership, a corporation, or an entity disregarded as an entity separate from its owner by applying the rules in Regulations section 301.7701-3. See Form 8832, Entity Classification Election, for more details. Note: A domestic LLC with at least two members that does not file Form 8832 is classified as a partnership for federal income tax purposes.
Foreign partnership - a partnership that is not created or organized in the United States or under the law of the United States or of any state.
For more information about partnership formation, you may refer to IRS Publication 541.