SOLUTION: LAW 352 Prince Sultan University Limited Liabilities Partnerships Discussion

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Limited Liabilities Partnerships
All about limited liabilities partnerships

Prince Sultan University
Names of Group Members
Name of the Instructor
Date of submission

Partnerships have been known to be one of the oldest forms of business. With time
however, the concept has continuously lost its touch due to the countless risks and disadvantages
that come with it. The major one identified is the unlimited liability of partners. In case a risk
arise, every partner involved is bound to suffer the consequences in case a liability arises. Over
the years there has been dire need for the formation of a business format that could combine how
flexible a partner turns out and the advantages of a limited liability company, with the whole
process taking place at a very low cost. That whole process is what led to the formation of a
limited liability partnership which has continued to gain popularity with time. The resultant LLP
therefore being termed as the legal entity formed and registered by two or more individuals with
the aim of doing business. Once registered, the limited liability sets in to be a corporate body
with perpetual succession, with legal personality separate from its partners. Business partners
under limited liability partnership are likely to have their rights and obligations considered unlike
those in general partnership. The interesting part about this Limited liability partnership is that
partners do not necessarily have to be natural people, but can include corporate bodies such as
companies and firms.

Limited liability partnership is known as legal and tax entry processes that permit
partners to gain profit from economies of scale. They work by allowing partners to work together
while still reducing their liability, for the sake of their partner’s actions. With legal entity
however, it is always important to check the laws of one’s nation before engaging in it fully.
Lawyers are always the best people to first consult, since they are considered to own firsthand
experience with limited liability partnership. They are quite common and one might equally miss
them at times. One is bound to miss the liability partnerships bearing in mind that having
business partners is all about spreading the risk, while leveraging individual skills and expertise.
The best part is that there is the concept of division of labor. With that therefore, the essay shall
feature on aspects of how to register a limited liability partnership, understanding the basics of a
limited liability partnership, ways to forming a more formal partnership, why it is important to
rely on an LLP, advantages of limited liability, disadvantages of limited liability, and examples
of limited liabilities around the world.

Main Report
Registration process
The first registration process is that partners are required to lodge a statement with the
registrar. For the statement to be rendered fit for use, it must contain the name of the intended
limited liability partnership, the nature of the business in general, and the proposed registered
offices of the entity. In the statement also, should have the names included, the identification
number and lastly the address to which every partner belongs. When one body for example is a
corporate, then the document will have to include the name, the incorporation’s place, the
number of registration which is also known as relevant substitute, and lastly names of the
registered offices of the corporate body. Foreigners are also considered to enter the limited
liability partnership. They become legible by providing all the required details, but a work permit
is a necessary requirement.
Basics of a Limited Liability
When it comes to limited liability, the concept of everything getting better with friends
sets in. to best work with limited liability, it is advisable for people to consider the aspect of
general partnership. General partnership is known as a profit bringing entity which is formed
through mutual understanding between two and more parties. In other words, it is a term used to
describe how two or more individuals work to make money. It is mostly informal, since all it
takes is shared interest with a written contract and most import, a handshake. The LPP’s are
mostly common in accounting firms, law firms, and between wealth managers. When partners
fail in an LPP, the creditors have no right to go after the partner’s personal asset or income. The
partnership structure becomes successful when every partner’s liability is limited to the amount
each person feeds into the business.
The informal part of the liability partnership, on the other hand has its downside. The first
downside is the risk associated with the legal liability. General partnership is therefore there to
help partners share liabilities incase an issue arise. To better understand, the concept a perfect
example is when two partners team up to come up with a venture. In the process, the products
they produce end up harming the public, then they both get sued for damages caused to the
people in public. It is for that reason that most people opt to consider changing general
partnership to a formal legal entity, to form a limited liability company. That act helps protect
personal assets from being part of any lawsuit.

Having a more formal partnership
The aspect of having a formal partnership in some professions is a necessary requirement.
However, the process shall require one to have a little more customized limited liability class
with a set structure. For the LLP to be successful there is the agreement that usually comes with
annual reporting requirements, which is all dependent on the legal jurisdiction. Just like is a
general partnership, all individuals in a limited liability partnership can take part in the
management of the partnership. The partnership becomes more formal when one partner obtains
all the power to take up the liability while the rest of the partners remain silent, but have a
financial say in the liability. With the management, everything under that is shared. Despite of it
being shared, most of the activities in the liability are greatly limited.
Importance of choosing an LLP
Those who use a limited liability partnership are often known to rely on reputation. Most
liability partnerships are formed and controlled by a group of professionals who own a lot of
experience and also have links to many clients among them. By bringing together resources, the
partners in the liability lower the cost of working while increasing the limited liability’s growth
capacity. Partners bring growth because they share office space, and employees a step to
reducing cost. When cost is reduced, partners will therefore have more profit from their activities
than when they could have worked individually.
Partners also seek to consider junior partners in the firm. The junior partners work for
them with future hopes of becoming full partners. The advantage of the junior partners is that
they are paid for the work done, and not because they have a liability in the partnership. What is
important to consider is that they are designated professionals who show potential of doing tasks
that partners bring forth. Juniors are commonly used by partners to scale their operations when it
comes to carrying out their tasks. When operations are scaled, partners are better placed to carry
out more business hence more profit. The other reason why people should choose the liability
partnership is that it allows for partners to be flexible. Under the LLP, is an agreement. The
agreement allows for partners to be added or be considered out, an aspect most especially
important to the business. When new partners are brought into the business, it brings more
probability for the business to have new business ideas. The LLP can also be identified as a flowthrough entity for the purposes of tax. That therefore means that partners can have access to

receive untaxed profits and in return pay taxes themselves. In most occasions, shareholders are
taxed on distributions.
Advantages of limited liability
There are three advantages of limited liability;
-Limitation of the partner’s liability: when liabilities are limited, it becomes the greatest
advantage to the partners. The limitation gets more considered bearing in mind that it is only
limited to the contribution to the partnership. Also, most of the partner’s assets are protected.
What makes it a major advantage is the fact that it is a separate legal entity which is distinct from
most of its partners. With that it means that it can own property or get sued in its name. It gets
easier to use the limited liability because it is responsible for its own liabilities.
-management of partnerships: It becomes easier to use limited liability because the traditional
partnerships were included in the entity. This means that partners are free to make a decision on
the management of the limited liability. The best part is that partners can decide to have their
partners manage all the affairs while the rest of them take up the place of the financiers. On the
other hand, they could consider having all the partners involved actively manage the activities in
the liability partnerships. The rights and responsibilities of every partner involved are very well
looked into, under the registered agreement of the limited partnership.
– Lacks double taxation: When LLP lack double taxation, it is considered a third major
advantage. This is so because, partners only pay their individual taxes, an aspect dependent on
the income form the partnership. The act helps bring more profit while better still reducing on
the expenditures incurred.
Disadvantages of LLP
-minimum eligibility: this is the first limitation of the LLP. When a liability has two partners the
probability of making loses I very high. It is so because, when a partner loses an old partner it
gets very difficult to immediately get a reliable one. That process is termed time consuming and
funds consuming since it is not easy to locate a good partner instantly. In other occasion, when a
partner is lost, it might get difficult to continue with the old entity, opting for a different entity
altogether. The other disadvantage of using the limited liability is that the body cannot raise
money from the public.
Branches around the world.

The liability exists in many countries. The existence however varies with the degree of
divergence from the United States model. In many countries, the liability is a tax flow-through
entity which is formulate for professionals who possess active roles in the management of
partnerships. In most countries, there is always a list of approved professional such as
accountants, consultants, lawyers, and architects.
The Limited Liability Partnership Act.
The liability partnership act is a wing of the parliament, which aims at making provisions
for the liability partnerships and for use on other connected intentions.

The accounting

records include invoices and other receipts for the payment of money, bills of exchange and
better till for the payment of other prime entries. The accounting records also contain
calculations by which accounts are made up.
The liability agreement
The limited partnership is found under an agreement. Mostly it is implied or expressed
The p…

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