What Are the Differences Between an LLP Company and Partnership


What Are the Differences Between an LLP Company and Partnership

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One of the major decisions business owners have to make as they start up their businesses is what kind of entity they want to form. There are pros and cons to all kinds of entities, so a business owner needs to look at the whole picture when making this decision.

The main difference between an LLPand a partnership is that with an LLP, the partners have limited liability. This means that they are not personally responsible for the actions of other partners in the LLP, or for the debts and obligations of the LLP as a whole. This is a good feature for professional business owners, such as lawyers, accountants, doctors, and other service providers.

Another difference is that with an LLP, there are more options for management structure. Partners can manage the entity themselves (commonly referred to as member management) or they can choose to hire or appoint members and non-members to manage the entity on their behalf (commonly referred to as manager management). This allows for more flexibility in how the entity is run.

Lastly, with an LLP, there are more ongoing government requirements than with a general partnership. For example, an LLP must file both an annual income tax return and MCA return with local authorities. In addition, the LLP must also publish certain information about its financial statements. These additional requirements may make an LLP less appealing to potential investors. However, for most small businesses, the benefits of an LLP outweigh the extra expense and burden of compliance with these regulations.

 

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