Benefits of LLP
Limited liability partnerships (LLP) and limited liability companies (LLCs) are two categories of business entities in Europe and the United States. These two entities offer a set of advantages and disadvantage depending on several factors. For instance, one of these entities might be a better choice depending on the goals and scope of a business.
1. Liability
Limited liability companies offer liability protection to all the members of the organization. The personal possessions of the members are not in any way at risk for the financial or legal obligations of the organization. On the other hand, LLPs also provide limited liability like that of the LLCs. Nonetheless, some state laws require that one shareholder of an LLP be accountable for the legal obligation of the organization.
2. No double taxation
Limited liability partnerships are normally taxed through the partnership directly. This avoids the possibilities of double taxation, which happens when distributed profits and income are both taxed.
3. Proper management
The significant advantage of limited liability companies is the ability to manage a partnership directly. In an organization, shareholders elect the board of directors, who are given the responsibility to make executive decisions pertaining to the company. Limited liability partnership is convenient as they allow each partner to control a certain portion of the business.
4. Some personal liability
Although some states restrict limited liability of partners, some do not. Some states only limit liability for negligent civil offenses but allow personal accountability for criminal actions or intentional torts. On the other hand, some states even restrict personal liability and intentional torts.
Limited liability partnership has some restrictions as well. For instance, the partnership is accountable for the actions taken by one of the partners. This simply means that being a partner of an LLP might be less secure as merely being a stockholder of the corporation.
