Limited Liability Partnership (LLP) – Advantages and Disadvantages of LLP

A partnership is an agreement between at least two people or entities to jointly own and run a business. The partners will share managerial duties as well as the profits and losses. That said, a limited liability partnership or LLP is a special partnership that gives protection to each partner against any negligence on the behalf of the other partners. A LLP can be formed only after the original general partnership has been formed. There are several advantages and disadvantages of limited liability partnership.

Advantages of Limited Liability Partnership

Some advantages of Limited Liability Partnership (LLP) are as follows:

Liability Protection

Each partner is personally responsible for the dealings of the company including debts, liabilities and any wrongful acts of the other partners. The liability protection that comes with a LLP is a big advantage. The individual partners are not held personally responsible for any company debts or obligations. Any lawsuit or claim against the company cannot be held against the partners, protecting personal assets.

Tax Advantages

The individuals in the partnership are liable for filing their personal income taxes as well as self employment taxes for the Internal Revenue Service. The partnership is not held responsible for paying these taxes. The credits and deductions of the company are divided among the partners according to the amount of interest in the company.


Partners have flexibility within business ownership under a limited liability partnership. Each partner has the decision to say how they will contribute to the operations of the business. Duties are either divided equally or based on the experience of the individual. Some who have contributed financially to the company have the right to remain a silent partner where they retain ownership without having authority over business decisions. Partners can decide how and where they are investing their time and money within the business.

Disadvantages of Limited Liability Partnership

There are also some disadvantages of LLP. Some of the cons are described briefly below.

Special Tax Considerations

For tax purposes a LLP is recognized in some states as a non-partnership. This could impact the partners who require special tax considerations. Every state does not recognize a LLP as a legal business structure. Some states only allow certain professionals such as lawyers and doctors to form limited liability partnerships.

Partners Not Consulting

The individual partners do not have to consult with each other over certain business arrangements. An agreement should be drawn up between the partners that outlines what each partner can and cannot do when making a decision about the business. Even though the general partners still have liability over the business, they do not have to consult with the other partners, this can cause dissention among the partners.

Death of a Partner

The limited liability partnerships are automatically dissolved upon the death of a partner. Even if there are steps taken to ensure that the company will continue beyond the demise of the partners, the LLP will not continue. The surviving partners can opt to re-establish a LLP but this will need to be done after each partner dies.

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