Limited Liability Partnerships Essay Example | Topics and Well Written Essays - 2500 words

Limited Liability Partnerships - Essay Example Limited liability partnership (LLP) maintains the many characteristics of general partnership but shields the partner against unlimited liability from the creditors of the firm. In a Limited liability partnership the is the advantage of a flexibility of an unlimited partnership coupled with the limited liability of the partner as the business incorporated in this structure is treated as a separate legal entity and makes the entity responsible for any business debts arising thereof. In the US, state registration is required to set up an LLP. Besides the state needs proof that the partnership has reached levels or has enough resources to satisfy potential claims in addition to satisfying insurance requirements. A limited liability partnership is not taxed as a separate entity instead; the profits pass to the hands of the partner who are charged with income tax. (Irwin Mitchel 2008) The above are the basic characteristics of the limited liability partnership entity. Find below a few important drawbacks of limited liability partnerships, which has been a block for many unlimited partnership concerns for conversion: 5. ... The money invested becomes the property of the firm, is not subject to return unless, and otherwise stated in the agreements. 2. All partners of an LLP must consent to the sale of the assets. 2 3. The non-transferable nature of a partners interest where the transferee only the financial benefit but does not become a partner. (Cool lawyer 2008) 4. LLP varies in legal requirements based on the laws of the state. This variable nature of this entity makes it the least preferable. 5. Limited liability partnership has an important handicap it being limited to certain types of businesses only example an association of professional's example: Lawyers, Chartered accountants, architects, doctors etc. Moreover, Limited liability partnership was only founded a decade over and the concept is still young which is subject to changes and bound by the laws of the state. In order to understand the reason for the unpopularity for this legal entity we must look at the features and viability of the other legal entities such as Limited corporations and general partnerships ' LLC LLP Unlimited Partnership What is it' A type of companyA type of companyA type of company Members needed to set up: Between 1-52 or more2 or more Taxation: Single taxation (Income / loss passed directly to members) Single Taxation Single taxation (Income / loss passed directly to members) Assets:Can hold Can hold Can hold 3 Legal entity: Separate entity from partners but members may be held liable for non-fiscal obligations.Separate from those of partners Has separate legal entity Management Level: Only Members and managing members.Decentralized Partners are Managers Legal