Advantages of Limited Liability Partnership (LLP)

Limited Liability Partnership (LLP) is a relatively new form of business entity that was formed to overcome the limitations of the existing forms of business entity mainly, Partnership and Company. The need for LLP grew as small business owners who usually started off with the Partnership form of business had to bear unlimited liability despite their meager means. Thus, Limited Liability Partnership (LLP) provided the much needed respite by combining the best of both worlds. By drawing its characteristics from both the partnership and the company form, it is slowly catching up to be a popular way of organising the business. As a hybrid, it makes the liability of the partners limited to the extent of their contribution to the firm and frees them from being held liable for the negligence or misconduct of their partners. This has therefore made it an attractive form of business entity. Following are the Advantages of Limited Liability Partnership (LLP)

Advantages Of Limited Liability Partnership (LLP)

The reason LLP is called a hybrid of partnership and company form is the feature of limited liability of the members to the extent of their contribution in the firm. It thereby overcomes the disadvantage of a Partnership firm. However, it draws some similarity with it by preparing an agreement that is similar to a Partnership Deed.

Limited Liability Partnership (LLP) allows more flexibility to the members to organise their internal structure. This is owing to the fact that in a company the Articles of Associations are drawn up by the management and others have to follow them blindly but this is not the case with the LLP. Here, the members mutually decide and arrive at the internal structure of the firm.

Companies are bound by the Act and henceforth do not have the autonomy to raise and utilise funds as per their will. LLP thus overcomes this limitation by allowing the partners to raise and use the funds at their own discretion.

LLP can have any number of partners without having to worry about any prescribed limit which is not the case with a company.

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