Limiting Liability: Professional Corporations and LLPs
Professional partnerships — physicians, CPAs, lawyers, and so on — may choose to become professional corporations (PCs), which are a special type of legal structure that state laws offer to professionals who otherwise would have to operate under the specter of unlimited partnership liability. States also permit limited liability partnerships (LLPs) for qualified professionals (such as doctors, lawyers, CPAs, and dentists), in which all the partners have limited liability.
These types of legal entities were recently created in reaction to large damage awards in malpractice lawsuits against partners. The professionals pleaded for protection from the unlimited liability of the partnership form of organization, which they had traditionally used.
Until these types of legal entities came along, the code of professional ethics of the various professions required that practitioners operate as a partnership (or as sole practitioners/proprietors).
Today, almost all professional associations are organized as PCs or LLPs. They function very much as partnerships do but without the unlimited liability feature, which is like having the best of both worlds.