A limited liability partnership (LLP) is similar to a normal partnership, but it also offers reduced personal responsibility for business debts. Unlike sole traders and partners of ordinary partnerships, the LLP itself - not the individual members - is responsible for any debts that it runs up, unless individual members have personally guaranteed a loan to the business.
LLPs are more complicated to set up and run than ordinary partnerships, as they have to meet many of the same requirements as limited companies. LLPs are designed to be used by profit-making businesses. Non-profit making organisations should not use this business structure.
Differences between general and limited partners
Any individual or legal body - for example a company - may be a partner in a limited partnership, either as a general or as a limited partner. However, you cannot be a general and a limited partner at the same time.
You will have different debts and obligations in a limited partnership, depending on which type of partner you are:
- General partners are liable for all debts and obligations of the partnership
- Limited partners are only liable for the debts or obligations they put into the business
Because limited partners have some form of legal protection from incurring any additional debts, they may not:
- Take out their contribution to the partnership for as long as it exists
- Control or manage the business
- Have the power to make any binding decisions for the firm
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