Which statement about LLPs and general partnerships is true?

• A. In a general partnership, partners have unlimited liability.
• B. LLP provides limited liability protection to all partners from one another’s malpractice or debts; unlike a general partnership, which has unlimited liability.
• C. LLPs are taxed as separate entities.
• D. LLPs provide liability protection only against external creditors.

Answer: (B)

The main idea here is how liability differs between LLPs and general partnerships. In a general partnership, partners have unlimited personal liability for the partnership’s debts and for the actions of other partners. That means personal assets can be at risk to cover obligations, including issues arising from a partner’s malpractice. In contrast, an LLP provides limited liability for the partners, so they aren’t personally liable for the partnership’s debts or for the malpractice of other partners. You still may be responsible for your own professional actions, but you’re protected from being sued personally for others’ mistakes or for the firm’s debts. That’s why the statement that LLPs give limited liability protection to all partners from one another’s malpractice or debts, unlike a general partnership with unlimited liability, is true. The other options aren’t correct because LLPs are generally pass-through for taxation, not taxed as a separate entity, and the protection isn’t limited to external creditors alone—it also covers liabilities arising from other partners’ acts within the firm.