For example, if your company hires Top Lawyers, LLP for legal representation, you know it's a limited liability partnership. The most important distinction between an LLP and a general partnership is the limited liability. This means that if the LLP is ever sued, only the assets of the partnership can be seized to pay the judgment. If your company sues a general partnership, your company could possibility acquire the personal assets of every partner in the firm to satisfy the judgment. LLP designation doesn't protect the assets of an individual who wrongs your company, also known as the tortfeasor.
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Liability Limited Partnership Miscellaneous » Unclassified. License Limitation Program Miscellaneous » Unclassified. For this reason, many people quickly turn general partnerships into formal legal entities like a limited liability company LLC.
In some professions, however, you need something a little more customized than an LLC with a set structure. Enter the limited liability partnership LLP. The LLP is a formal structure that requires a written partnership agreement and usually comes with annual reporting requirements, depending on your legal jurisdiction. As in a general partnership, all partners in an LLP can participate in the management of the partnership.
This is an important point because there is another type of partnership—a limited partnership —in which one partner has all the power and most of the liability and the other partners are silent but have a financial stake. With the shared management of an LLP, the liability is also shared—although, as the name suggests, it is greatly limited.
Professionals who use LLPs tend to rely heavily on reputation. Most LLPs are created and managed by a group of professionals who have a lot of experience and clients among them. They can share office space, employees, and so on. Most important, reducing costs allows the partners to realize more profits from their activities than they could individually. The partners in an LLP may also have a number of junior partners in the firm who work for them in the hopes of someday making full partner.
These junior partners are paid a salary and often have no stake or liability in the partnership. The important point is that they are designated professionals who are qualified to do the work that the partners bring in. This is another way that LLPs help the partners scale their operations.
Junior partners and employees take away the detail work and free up the partners to focus on bringing in new business. Another advantage of an LLP is the ability to bring partners in and let partners out.
Because a partnership agreement exists for an LLP, partners can be added or retired as outlined by the agreement. This comes in handy, as the LLP can always add partners who bring existing business with them.
Usually, the decision to add requires approval from all of the existing partners. Overall, it is the flexibility of an LLP for a certain type of professional that makes it a superior option to an LLC or other corporate entity. This means that the partners receive untaxed profits and must pay the taxes themselves. Both an LLC and an LLP are preferable to a corporation, which is taxed as an entity and its shareholders taxed again on distributions.
The actual details of an LLP depend on where you create it. Shana Dale, B. Amanda Dale, B. Jesse Schmidt, B. Ingrid Saffrey, B. Moore, B. David Citron, B.
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