Advantages of LLP – Limited Liability
What are the Advantages of LLP?
Limiited Libility Partnership is not considered to be a separate entity for the purposes of income tax — any profits and losses of an LLP are passed through to the partners this avoids double taxation.
A partner in a Limited Liability Partnership is only personally liable for his or her own negligence or that of an employee working under the partner’s direct supervision.
A partner isn’t personally liable for the negligence of anyone else in the firm. However, the partner can not negate liability for a large variety of partnership debts that were not as a result of his or her own negligent act. Any obligations owed to business creditors, lenders and landlords — regardless of which partner incurred the obligation for the partnership is the responsibility of all the partners of an LLP.
What are the Disadvantages of LLP?
Contributions made by the partners to Limited Liability Partnership are owned by the partnership and is no longer recognized as being an individual partners asset. Therefore the assets are only distributed between the partners as specified in the Partnership Agreement.
A partner is able to bind the whole partnership into contracts without the consent of the other partners. Any obligations owed to business creditors, lenders and landlords — regardless of which partner incurred the obligation for the partnership is the responsibility of all the partners of an LLP.
There are complex filing and administrative regulations similar to those of Limited Liability Corporations.
Also some states only allow certain profession to become LLP’s namely accountants, architects, engineering and lawyers.
How do you set up a Limited Liability Partnership?
The partnership must have a name that incorporates LLP or RLLP to the end of it. It then must make an application to register the formation with the Secretary of State.
Do I need an Attorney?
An attorney will be able to set up the LLP up for you, which usually involves a high fee. However you are able to set the business formation up yourself without too much difficulty and save the attorney fees to invest in your business.
Where Can I get the Forms?
You can get the forms from several major legal document providers, but I have seen some great reviews from Legalzoom.com, who are able to provide a range of packages for the formation of your Limited Liability Partnership, depending on how involved you want to be. Find out more about the process of Incorporations & LLC’s
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