Limited Liability Partnership: An Emerging Business form for Entrepreneurs

Abstract

Partnership is an association of two or more persons engaged in business and sharing both the costs and profits. Normally each partner is jointly liable with the partnership for the obligations of the partnership. The degree of liability protection is taken into consideration when deciding how to structure business. The choice then lies between creating a Limited Liability Company or a Limited Liability Partnership. Though both provide personal liability protection to a certain degree but differences exist between the two in terms of liability protection, taxation, ownership etc. LLP on the one hand provides the business the benefit of a limited liability whereas on the other hand it allows the members the flexibility of organizing their management based upon a mutually arrived agreement just like that seen in the case of a partnership firm. LLPs have now become a preferred choice for businesses especially for service industry or for those activities that involve professionals. LLP does not differ much from a standard partnership but for the advantage of the individual members having lower liabilities to any debts that may arise while running a business. But in LLP there is an increase in administrative duties than those while running a Partnership business. The primary aim of this paper is to discuss the basic concept of LLP and the manner in which it differs from the other businesses. As we know that primary goal of the Limited Liability Partnerships is to boost the entrepreneurship among the small and medium sector business enterprises and to convert them into a systematic form of business organization. Therefore in the present paper attempt has been made to discuss how LLP model as present in India is beneficial to the SMEs and the entrepreneurs.