About Partnership Limited Liability

There is a slight difference between limited liability partnership and limited partnership. For LLP, one member is not required to be responsible of the other member’s act if he is not involved in it. Partnership limited liability (LLP) is a structure where one partner may not be liable for the actions taken by the other partner in the corporate. This offers a much more protection for the partners compared to the previous ones. The main advantage offered by LLP is that the members of LLP are able to set their liability limit in case anything wrong happens to the business. And of course, those who loan money to the LLP for instance the bank requires guarantee from the members.

In the older days, business owners who wanted to set a limit to their personal liability, the profits made by their companies are subjected to corporation tax. Incomes of the shareholders are taken from the dividends paid by the company. However, today, partnership limited liability introduced is taxed in a different manner where the profits are taken as a personal income instead. One of the requirements is that LLP must publish its financial accounts and submit it to the Registrar of Companies annually. The publication format or requirement is much more complex and demanding.

Since LLPs are still new, no decisions have been decided by the courts yet if something is to go wrong. However, people at the present understands that if a member of LLP were to provide a bad advice hence causing the client to suffer loss, the client is able to bring the matter to court to be awarded with compensation. And in under certain circumstances, the member who gave the advice might be asked by to court to pay compensation to the client too. Other members who were not involved in giving the client advice would not have a personal liability.

Therefore, there is a necessity for LLPs who found themselves in such position to have appropriate insurance cover. Another area which needs to be taken care of is the insolvent trading. Members of LLP can be prosecuted just like normal company directors. He might even be disqualified from becoming a LLP member in the future.