If you've decided to structure your business as some form of partnership, you'll want to understand the differences between a Limited Partnership (LP) and a Limited Liability Partnership (LLP).

Not all countries permit LLPs form of business registration, and some restrict them only to certain professions such as lawyers, accountants, architects, engineers. In comparison, LP and an LLP have different organizational structures, details of which many Nigerians should study properly before deciding what form of business structure to register.

An LP can be formed with one person as the general partner, but an LLP requires at least two general partners. In this context, (a person) can be either an individual or a business entity such as a corporation, an LLC, another LP, or another LLP. In an LP, there are two classes of owners, called "general partners" and "limited partners." There may be one or more general partners, and one or more limited partners. General partners make business decisions and handle the day-to-day business operations. Limited partners are basically investors who contribute assets to the business and who share in the profits, but who do not participate in the decision making or business operations.

An LLP only has one class of owners - general partners, ie, a group of lawyers all of whom contribute money, assets, or time to the business. All are entitled to participate in business decisions and operations, and all share in profits or losses.

All countries have laws governing both limited partnerships and LLPs. Both need to file some type of registration document with the appropriate state agency, as in the Corporate Affairs Commission in Nigeria. The registration requirements laws typically have certain rules as to the content of the partnership agreement, the duties of the partners, and annual reporting.

An LP is formed by all of the partners signing a limited partnership agreement. This agreement includes the name of the partnership, the names of the general and limited partners, the contribution each partner will make, how profits will be distributed, and how new partners may be admitted. If there is more than one general partner, there may be an additional agreement just between the general partners.

An LLP is formed by all of the partners signing a limited liability partnership agreement. This agreement is similar to a limited partnership agreement, except there will not be provisions relating to limited partners. Limitation of Liability A primary concern for business owners is their personal liability for the debts of the business, including those from lawsuits.

If a business is operated as either a sole proprietorship or a general partnership, creditors of the business may go after the personal assets of the owners if the business does not have sufficient assets. In other words, the owner's home, car, personal bank accounts, and so on, may be lost to satisfy business debts and court judgments. A corporation, a limited liability company (LLC), a limited partnership (LP), or a limited liability partnership (LLP) will offer some limitation of personal liability, which is one of the main reasons such business entities were created.

With an LP, the general partners still have personal liability. However, limited partners are not liable for business debts, including any losses the business may suffer. The limited partners only risk what they invested in the business. An LLP offers limited liability for all of the partners. This limitation of liability applies to business debts such as contractual obligations and claims for negligence, but does not extend to claims for certain intentional or criminal acts such as fraud or a partner physically assaulting someone.

Raising Capital - An LP is often better than an LLP if you expect to add partners in order to raise funds to expand your business. With an LP, limited partners can be added without giving them the right to participate in business decisions. Any partners added to an LLP will have the right to participate in business decisions and operations. ​