Introduction. Introduction

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PLAN

Introduction

1 The Concept of a Limited Liability Partnership.

2. Establishment of a limited liability partnership.

3.Governance of a limited liability partnership.

The use of literature

Introduction

To understand a limited liability partnership, it is best to start with the general partnership. A general partnership is a for-profit entity that is created by a mutual understanding between two or more parties. This is a very technical way of saying two or more people working together to make money. A general partnership can be quite informal. All it takes is a shared interest, perhaps a written contract (though not necessarily), and a handshake.

Of course, with the informal nature of a general partnership, there is a downside. The most obvious risk is that of legal liability. In a general partnership, all partners share liability for any issue that may arise. For example, if Joan and Ted are partners in a cupcake venture and a bad batch results in people getting sick, they can both be personally sued for damages. For this reason, many people quickly turn general partnerships into formal legal entities like a limited liability company (LLC). An LLC, like JT’s Cupcake Factory, can stand in for Joan and Ted as a legal entity and protect their personal assets from being part of any lawsuit.Professionals who use LLPs tend to rely heavily on reputation. Most LLPs are created and managed by a group of professionals who have a lot of experience and clients between them. By pooling resources, the partners lower the costs of doing business while increasing the LLP’s capacity for growth. They can share office space, employees and so on. Most important, reducing costs allows the partners to realize more profits from their activities than they could individually.

The partners in an LLP may also have a number of junior partners in the firm who work for them in the hopes of someday making full partner. These junior partners are paid a salary and often have no stake or liability in the partnership. The important point is that they are designated professionals qualified to do the work that the partners bring in. This is another way that LLPs help the partners scale their operations. Junior partners and employees take away the detail work and free up the partners to focus on bringing in new business.

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