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what is a LLP

keshavamurthy mb (145 Points)

20 March 2018

what is a LLP

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G Vijaya Kumar (Audit Assistant) (556 Points)
Replied 20 March 2018

LLP means it's A limited liability partnership (LLP) is a partnership in which some or all partners (depending on the jurisdiction) have limited liabilities. It therefore exhibits elements of partnerships and corporations.[1] In an LLP, each partner is not responsible or liable for another partner's misconduct or negligence. This is an important difference from the traditional unlimited partnership under the Partnership Act 1890 (for the UK), in which each partner has joint and several liability. In an LLP, some partners have a form of limited liability similar to that of the shareholders of a corporation.[2] In some countries, an LLP must also have at least one person known as a "general partner" who has unlimited liability of the company. Unlike corporate shareholders, the partners have the right to manage the business directly.[3] In contrast, corporate shareholders have to elect a board of directors under the laws of various state charters.[3] The board organizes itself (also under the laws of the various state charters) and hires corporate officers who then have as "corporate" individuals the legal responsibility to manage the corporation in the corporation's best interest. A LLP also contains a different level of tax liability from that of a corporation.

Limited liability partnerships are distinct from limited partnerships in some countries, which may allow all LLP partners to have limited liability, while a limited partnership may require at least one unlimited partner and allow others to assume the role of a passive and limited liability investor. As a result, in these countries, the LLP is more suited for businesses in which all investors wish to take an active role in management.

There is considerable confusion between LLPs as constituted in the U.S. and those introduced in the UK in 2001 and adopted elsewhere (see below) as the UK LLP is, despite its name, specifically legislated as a corporate body rather than as a partnership. In Nigeria, limited liability partnerships have legal personality. However, one must register a partnership first before it can gain the status of limited liability partnership. In Kenya, limited liability partnerships similarly have legal personality distinct from its member partners. The liability of the partners is limited to any amount that may remain unpaid over the capital of the partnership. However, partners may be deemed liable for omissions or actions done by themselves if they lacked the relevant authority from the partnership or the affected party knew that such partner lacked authority or had no reason to believe that such person was a partner in the partnership. Registration is what vests such legal personality upon the entity. Registration is done by the registrar of Companies after meeting. The requirements set out in the Limited Liability Partnerships Act.