Partnership vs LLC Guide (2026): General, LP & LLC Differences

A Multi-Member LLC provides limited liability protection to all equity owners, whereas a General Partnership holds every partner jointly and severally liable for all commercial debts and partner torts.

When two or more individuals launch a business together without registering a corporate entity, state corporate law automatically classifies the business as a General Partnership (GP). In a general partnership, every partner possesses statutory agency authority to bind the partnership to contracts, and every partner is personally liable for commercial debts and negligence claims incurred by any other partner.

Forming a Multi-Member LLC shields all members from personal liability while maintaining the exact pass-through tax advantages of a partnership under Subchapter K of the Internal Revenue Code (filing IRS Form 1065 and issuing Schedule K-1 forms).