Limited Liability Partnership Benefits: What Are They?
A limited liability partnership is basically a hybrid of two main company structures. During the mid-nineties this organization structure emerged to become a blend of both the corporation and the ordinary partnership. Limited liability partnership benefits, therefore, predictably take the best that each structure has to offer and molds them into one form. Take a look at the major benefits below.
Limited Liability
Just like a corporation can be a limited liability company, so too can a LLP and is created to protect the assets of its member partners. Under the laws governing regular partnerships, one partner is liable for the actions of the others and each partner cannot exempt his personal assets from the reach of the law if the company gets into debt. However, the LLP can shield the assets of its member partners because the partners can have limited liability in the same way that a corporation does. This means that in the event that the company gets into debt, each partner only stands to lose what they put into the company and nothing more. There are different laws in some states, but the worst case scenario is that at least one partner must have unlimited liability.
The Right to Maintain Direct Control
Whereas in a corporation, the shareholders (who enjoy limited liability) do not have the right to directly manage the day-to-day operations of the company, but must hire a board of directors to make decisions on their behalf, the LLP maintains the right to direct control. This is one of the major limited liability partnership benefits because it means that the partners can each bring their specialties and expertise to the company directly. It is, therefore, easy to recruit partners that specialize in various areas to create the skill-set that the partnership desires.
Avoid Double Taxation
Under a corporation the shareholder’s income is taxed while the company’s profits are also taxed. This is considered to be double taxation because the revenue earned is essentially the same and yet it is taxed on two sides of the equation. However, under a limited liability partnership this does not occur and the income is taxed only once.
Easy to Convert
Switching to a corporation status can be very frustrating. There are tons of legal documents to file, the company has to legally be created as a separate entity and the assets must be established as the property of the corporation. This can take a lot of paperwork which translates into lots of time. To switch to a limited liability partnership in stark contrast is very easy. There are simple and clear forms that state the members of partners that make up the company structure and the entire agreement does not need to be dissolved in the event that one partner decides to leave and another takes his place.
Overall there are a considerable number of benefits to taking up limited liability partnership status and they should not be undervalued in any way.
Reference:
Limited Liability Partnership - Wikipedia
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