A limited liability partnership business (LLP) is a very common type of business structure. It consists of partners who run the business, only some of all therein have limited liability.
This type of business arrangement has several advantages over others. For one, partners have LLP tax benefits that other types of business partners do not: an LLP partner is not tax on business profits made by the company. Furthermore, partners in an LLP have limited liability; that is, unlike with corporate shareholders, partners in an LLP have the right to run the business directly. This is in contrast to corporate shareholders: their major difference from a limited liability partnership is that they must elect a board of directors who have the hand in seeing day-to-day operations. Two other major advantages to a limited liability partnership is that partners are not personally liable for company debts. In addition, management of an LLP is far more flexible than other structures. It does not involve bureaucratic entanglements that are so common in corporations. Further, autocracies which are so common in smaller businesses are also avoided.
Given the legal issues involved, it is important that when a group of partners wants to start an LLP, they should take pains to get it right. One of the most important steps is in writing up an LLP agreement. This is an actual legal document that lists partners, business structure, company type registration, and other related issues.
The owners of the LLP are simply called members. Members are not limited to individuals; they may also be corporations or foreign entities. The law does not limit the number of members that might comprise a limited liability partnership.
Given the potential legal complexities involved in business, it is highly advisable for those wishing to start an LLP to consult with a business or corporate lawyer. They can help the members to produce a properly structured LLP agreement, and educate them on what the law says about how an LLP is to be operated. For these reasons, contacting a lawyer who specializes in business is crucial to an LLP’s long-term stability.