What Is the Difference Between an LLP and an LP? A Maryland, D.C., and Virginia Guide

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For business partners weighing a limited partnership (LP) against a limited liability partnership (LLP), the choice comes down to two questions. Who runs the business, and who is personally responsible when it owes money? In an LP, at least one general partner manages the company and remains personally liable for its obligations, while limited partners invest and stay protected. In an LLP, every partner may help manage the business, and every partner receives the statutory liability shield. Maryland, Washington, D.C., and Virginia all follow that basic architecture, but the details differ in ways that can change your personal exposure. A Maryland, D.C., and Virginia business formation attorney can match the structure to your goals before you file. This guide compares liability, management, taxes, and formation steps across all three jurisdictions.

What Is a Limited Partnership (LP)?

A limited partnership is a partnership with two tiers of owners. It must have at least one general partner, who manages the business, and at least one limited partner, who typically invests capital and stays out of daily operations.

An LP does not exist until a certificate of limited partnership is filed. In Maryland, the general partners file the certificate with the State Department of Assessments and Taxation. In Washington, D.C., the certificate is delivered to the Mayor for filing. In Virginia, it is filed with the State Corporation Commission. In each jurisdiction, the LP is formed when the filing takes effect, or at a later time the certificate specifies.

Families, real estate ventures, and investment funds often choose LPs because the structure separates the people running the business from the people funding it.

What Is a Limited Liability Partnership (LLP)?

A limited liability partnership is a general partnership that elects a statutory liability shield by making a state filing. Maryland partnerships file a certificate of limited liability partnership with SDAT. D.C. partnerships file a statement of qualification after the partners approve the election. Virginia partnerships file a statement of registration with the State Corporation Commission and become a registered limited liability partnership.

Unlike an LP, an LLP has no tiers. Every partner can take part in management, and every partner receives the liability shield. Law firms, accounting firms, and other professional practices use LLPs heavily, but none of the three DMV jurisdictions limits the structure to licensed professions. Any qualifying partnership may elect LLP status.

How Does Partner Liability Differ Between an LP and an LLP?

In an LP, the general partner carries the risk. Maryland, D.C., and Virginia all make general partners jointly and severally liable for partnership obligations. Limited partners generally are not personally liable for the partnership’s obligations.

The three jurisdictions split on what a limited partner can do without losing that protection. In Maryland and Virginia, a limited partner who takes part in controlling the business can become liable to outsiders who reasonably believe the limited partner is a general partner. Both states list safe activities, such as advising the general partner or voting on major decisions. D.C. follows the modern uniform rule, so a District limited partner keeps the liability shield even while participating in management and control of the business.

In an LLP, the shield covers everyone. A Maryland LLP partner is not personally responsible for partnership debts and obligations solely because of partner status. A partner in a Virginia registered LLP is not personally liable for obligations the partnership incurs while registered, and D.C. law makes such obligations solely the partnership’s own.

No LLP shield excuses a partner’s own misconduct. Maryland’s statute says so expressly. A partner remains liable for debts arising from the partner’s own negligent or wrongful acts, and for those of people the partner negligently appoints or supervises.

Who Runs the Business in an LP and an LLP?

In an LP, management belongs to the general partners. Limited partners in Maryland and Virginia should stay within the statutory safe harbors if they want certainty about their protection. In D.C., limited partners may be more active, though the partnership agreement still controls who holds actual authority.

In an LLP, the partnership agreement allocates management among the partners. That flexibility is one reason professional firms favor the structure. Whatever the structure, a detailed written partnership agreement covering contributions, profit splits, authority, dispute resolution, and exit rights is the document that prevents most partnership fights.

How Are LPs and LLPs Taxed?

For federal income tax, both structures work the same way. The partnership itself pays no federal income tax. It files an annual information return, Form 1065, and sends each partner a Schedule K-1. Partners then report their shares of profit or loss on their personal returns, so business profits are taxed once, at the partner level.

Self-employment tax treats the two ownership roles differently. A general partner’s share of business income generally counts as self-employment earnings. Federal law excludes a limited partner’s distributive share, other than guaranteed payments for services the partner actually renders. Whether an LLP partner qualifies for that limited partner exclusion is a fact-specific question, so review it with a tax advisor before you rely on it.

How Do You Form an LP or an LLP in Maryland, D.C., or Virginia?

The sequence is similar everywhere. First, negotiate and sign a partnership agreement. Second, satisfy the jurisdiction’s name and registered agent requirements. Maryland filings must name a resident agent and a principal office in the state. D.C. requires an agent for service of process who is a District resident or otherwise authorized to do business there. Virginia spells out who may serve as registered agent in the filing itself. Third, file the correct document, a certificate for an LP, or the LLP election filing, with SDAT, the Mayor’s office, or the SCC, and pay the filing fee.

The paperwork is the easy part. The partnership agreement, and the tax elections that follow, are where an experienced advisor earns their keep.