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50 Ala. L. Rev. 813 (1998-1999)
The LLC Versus LLP Conundrum: Advice for Business Contemplating the Choice

handle is hein.journals/bamalr50 and id is 821 raw text is: THE LLC VERSUS LLP CONUNDRUM: ADviCE FOR BUSINESSES CONTEMPLATING THE CHOICE Fallany 0. Stover' Susan Pace Hamill* I. INTRODUCTION In recent years the number of unincorporated entities offer- ing limited liability and partnership taxation has increased substantially.1 Among the newer choices, limited liability com- panies (LLCs) arrived on the scene first, with limited liability partnerships (LLPs) appearing a few years later as a serious challenge to the LLC's domain.2 Alabama offers businesses the * B.S., University of Alabama, 1995; J.D., University of Alabama, 1998; and associated with the law firm of Maynard, Cooper & Gale, P.C., Birmingham, Ala- bama. This Article grew out of an independent study project Ms. Stover completed for Professor Hamill during her third year of law school. ** Associate Professor of Law, The University of Alabama. Professor Hamill thanks Dean Kenneth Randall and her faculty colleagues for all of their support and gratefully acknowledges the University of Alabama Law School Foundation, the Ed- ward Brett Randolph Fund and the William H. Sadler Fund. Professor Hamill spe- cially recognizes the students in the Fall 1997 and 1998 classes on LLCs and LLPs, especially James Coomes, Wade Hartley, Rick McBride, John Donsbach, and Charles Gorham, whose valuable classroom participation contributed greatly toward the un- derstanding of the issues in this Article. 1. Unincorporated business organizations in Alabama include sole proprietor- ships, general partnerships, limited liability partnerships, limited partnerships, and limited liability companies. Corporations that have properly elected subchapter S status are taxed as pass-through entities but face many restrictions not applicable to partnerships. The restrictions faced by S corporations cause many businesses to choose one of the many unincorporated business forms taxed under the partnership provisions. See Walter D. Schwidetzky, Is It Time to Give the S Corporation a Prop- er Burial?, 15 VA. TAX REV. 591, 624 (1996). A comparison of the complex business and tax differences between S corporations and unincorporated businesses taxed as partnerships is beyond the scope of this Article. See also ALA. CODE § 10-8A-101(5) (Supp. 1998) (defining a partnership under Alabama law); id. § 10-8A-1001 (listing the requirements for registering as a registered limited liability partnership); id. § 10-9B-101(9) (defining limited partnership under Alabama law); id. §§ 10-12-1 to -61 (1994) (establishing the Alabama limited liability company). 2. See infra notes 3-4 and accompanying text. 813

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