Limited Liability Partnership

WHAT IS LIMITED LIABILITY PARTNERSHIP?

Understanding Partnerships in general

Partnerships are of different types but they all share some common characteristics as below;

• They exist as separate entities but in most cases partners are liable for their actions in the partnership.

• They are all made up of persons in agreement with the partnership act

• Partners receive money in form of distributive shares and not salaries. Partners are therefore not employees.

• All partnerships file tax returns for their income taxes

LIMITED LIABILITY PARTNERSHIPS

With above common characteristics, a Limited Liability Partnership (LLP) can be defined as general partnership in which partners have limited personal liability. The partners’ liabilities vary depending

However in some, only attorneys and accountants are allowed.

An LLP should not be confused with a Limited Liability Company (LLC) or a Limited Partnership (LP). A Limited Partnership has general and limited Partners whereas a Limited Liability Company has shareholders instead of partners.

Difference between a Limited Liability Partnership and other partnerships

The following are some of the differences between an LLP and limited or general partnerships;

• In a Limited Liability Partnership, partners share general management roles. The only difference is that the assumed managerial roles are not as flexible as in General Partnership.

• Unlike in general partnerships, all Limited Liability Partners are protected from negligence or wrongful acts of other partners.

• Negligent partners or those involved in unlawful acts remain personally liable but the rest are shielded from the liabilities that may arise from those acts

• Compared to General Partnerships, most professionals prefer forming LLPs since they are guaranteed protection from malpractices by other

Some limit LLPs to certain professions and may not recognize Liability Partnerships without such limitations. Again, in some states, limited Liability Partnerships are treated like general partnerships.

• No privacy; privacy in LLPs does not exist because members’ financial details must be disclosed and kept in public record

• Income tax; this may be high compared to corporation tax which has a flat rate of 20 per cent

• Need for address; A Limited Liability Partnership must have a registered service address for statutory mails

• Unsuitable for everyone; An LLP is not suitable for charitable activities. It can also not remain dormant for an indefinite period of time since it is registered for trade and profit making.

• Statutory records; Legally, An LLP must have accurate statutory records. These records should be open and accessed by the public for any reasonable purpose at the LLP’s registered