Business Law: Limited Liability Partnership - Coursework Example

A Limited Liability Partnership (also known as LLP) is fundamentally a common partnership having one important difference i.e. absence of individual and personal liability of debts and obligations upon partners. It protects all of its partners, like a lawful shield against any kind of personal liability, as in other forms of partnership are experienced. In LLP, an investor’s liability is narrowed down to the amount he had invested in the business concern. A major reason and lead that this type of partnership has is that it prevents and protects others partners from being penalized for the misconduct and wrong doings of others. The laws pertaining to an LLP differ nationwide and even across the globe. Although this type of a business concern can be applied and used in any industry, but so far, accounting and law firms have been seen to endorse such type of business foundations and activities. A limit to which an individual’s liability can be extended is mostly given by that states LLP legislation or the companies’ ordinance and act. If a partner, in person, is liable to the partnership and his other co-workers and partners for any breach contract and professional misconduct on duty, a plaintiff can prick the communal agreement of the LL P or the business concern and can fearlessly sue that individual member who’s liable for a breech. A business concern or a partnership that delivers definite professional services, can also get itself registered as a professional limited liability partnership, being no different from an ordinary limited liability partnership, it just provides professional services. Such a business typically consists of professionals from law, medicine, engineering and accounting. As an example we take the New Yorks LLP statute that hampers the eligibility solely to partnerships that provide professional and qualified, high level services. In the type of a business concern under consideration, the number of individuals involved in the partnership share in the risks and responsibilities & loss and profits of the business. This explains the reason for a limited liability partner to be on the safe side even if the company runs into a financial crisis or trouble. Setting up an LLP Every partner and member registered itself as self-employed There are always two designated members (as the law names them); they are given some extra and harder responsibilities to manage. They are responsible for additional duties like filing and providing information to third parties If there are equal to or less than the required number of members to be assigned as two designated members, every member should behave and manage the firm like a designated member It’s a compulsion for an LLP to get registered at Companies House or the chambers of commerce whatever that country has It is always feasible and lawful to document all the terms and conditions between the members Financing and Managing the Business: As a normal practice, members are managers of the business but to keep a uniform flow of management of activities, members can hire qualified and deserving employees too Loans or personal assets are normally used to finance such a business concern/partnership Keeping Accounts and Managing Profits Every LLP should have its accounts registered with the chambers of commerce or the companies’ house Unless specified otherwise in the agreement, every member take an equal share of the profit from the company’s earnings The profits earned by an LLP are taxable and members or investors of an LLP must pay taxes and national security insurance according to the bracket that they fall under Another important point is that if a company exempts a person from continuing any partnership with him, he is not liable to any profit or loss being incurred by the company Critics claim that the LLP law must integrate a recoup rule which allows the liquidator to investigate about all the withdrawals made by the firm on behalf of any member i.e. the investor on a time span of atleast one year aforementioned from the date of commencement of the liquidation. These withdrawals are pertaining to share of profit, employee’s salary repayment or payback of interest on a loan by the firm. In instances where an LLP concern has to continue for about or more than 6-months with a single individual/investor, that member then becomes a single and sole owner and jointly liable for all the liabilities and profits. Another point worth noticing is that if a person i.e. an investor or member authorizes the signature of a check and the name of the company is not printed correctly on that instrument, the instrument becomes liable to the holder unless the amount is agreed and then paid by the LLP concern itself. It is considered a caution for all the LLP members that they should be extra cautious about dealing in over-the-liability amounts with another company. The notion that is given here is for the fact that the dealing party should not be suspecting the members as being the agent of the company or being some prank dealers, dealing on behalf of the company. However, this sort of protection should not be taken for granted and LLP should take care of all the companies’ acts and business activities keenly, so that there is not a blotch of misconduct or false or fake agreement and deal. All the members of an LLP concern are indebted to a personal and professional responsibility of heed that besides a clear assumption of responsibility, the company and the investors should have a clear relationship with the customer or the client. It is the duty of the court to look into the matter and judge about who is the culprit and who’s not. Also that the breech of contract and responsibility falls on who’s part. This is also considered as the main liability and responsibility of the co-investors and partners as well to look for clear procedures and honest dealings whenever there is a client and customer relationship. As a matter of law, any form of liability that falls under the category of civil or criminal should be dawned upon collectively on all the members of the firm. Financial penalties should be practiced against any breach of contract, law or legal requirements by the companies’ act or companies’ house. Laws pertaining to LLPs, file all the terms and conditions required for such companies i.e. LLPs to disqualify a person if he is found to be guilty of being involved in suspicious activities, dealing with some third parties on behalf of the LLP when the deal is of no concern to the LLP, also an outside person shadowing the members in a way that he is involved into some illusory deals with major clients of the company. Conclusively this is allowed to carry out a disqualification order against any member or a so-called shadow member of a limited liability partnership concern if their action in such a conduct requires any warrant. Such an order against any member or an investor of an LLP will exclude the concerned person from being a member of that LLP. Such orders for disqualification can be made against breaches of on-going duties and concern. However, the court, then decides the extent of breech and the reasons involved while approving or disapproving the case. Bibliography Limited Liability Partnership. http://www.accountancy.com/articles_students.asp?id=150 (accessed March 1st, 2010). Limited Liability Partnership. http://legal-dictionary.thefreedictionary.com/Limited+Liability+Partnership (accessed March 1st, 2010). Limited Liability Partnership. http://www.investorwords.com/5636/Limited_Liability_Partnership.html (accessed March 1st, 2010). Practical advice for business. http://www.businesslink.gov.uk/bdotg/action/detail?type=RESOURCES&itemId=1073789612 (accessed March 1st, 2010). Read More