Limited Liability Partnership (LLP)
KAPG & Associates

A Limited Liability Partnership (LLP) is a business structure that combines features of both partnerships and corporations, particularly popular for small to medium-sized businesses and professional firms. An LLP is often chosen by entrepreneurs who want a flexible structure with liability protection without the stringent regulatory requirements of a corporation. Here are the main aspects of an LLP:

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  1. Limited Liability: Partners in an LLP have limited liability, which means they are only responsible for the debts of the business up to their investment in it. Personal assets are generally protected.
  2. Separate Legal Entity: An LLP is treated as a separate legal entity from its partners, so it can enter into contracts, own assets, and be held accountable independently of the individuals involved.
  3. Flexibility in Management: LLPs offer flexibility in management and organizational structure, as partners can decide on roles, responsibilities, and profit-sharing arrangements in the LLP agreement without strict corporate formalities.
  4. No Maximum Limit on Partners: While an LLP requires at least two partners, there’s no upper limit, making it suitable for businesses needing a large team of partners.
  5. Perpetual Succession: An LLP continues to exist regardless of changes in the partners, similar to a corporation. This provides continuity, as the entity isn’t impacted by the death or departure of any partner.
  6. Tax Benefits: LLPs are often taxed as partnerships, which means the business itself isn’t taxed on profits. Instead, profits pass through to the partners, who report income on their tax returns, avoiding double taxation.
  7. Less Compliance: Compared to private limited companies, LLPs generally have fewer compliance requirements, making them easier and cheaper to maintain.
  8. Suitable for Professionals: LLPs are particularly favored by professional firms like law, accounting, consulting, and other service-based businesses because of the liability protection and partnership flexibility.