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Roles of Limited Liability Partnerships and Corporations

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Explain the roles of limited liability partnerships and corporations. If you were establishing your own business, under what circumstances would you choose one from the other? Please provide references, if you use any.

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Solution Summary

The roles of limited liability partnership and corporations are explained. Under the circumstances each situation would be used is analyzed.

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Limited liability partnerships provide business and those offering professional services then benefit of single taxation as partnership as well as limited liability. So how does this different from Limited Liability? Well, LLP statutes were drafted to shield innocent partners from negligence or malpractice liability of their partners. Furthermore, this protection allows the innocent partners free from any obligation to contribute personal assets beyond what they have invested in the partnerships. However, LLP partners remain fully liable for their own negligence and continue to have unlimited liability for the wrongful acts of those whom they directly supervise and control

Now, most of the groups of professional form this type of partnership i.e. doctors and lawyers. So, here are some of the major roles of the LLP:

1. It provides strong protection to all the partners, which can be related to debt, risk and obligations. Misconduct of one does not harm the profitability of another partner.
2. No liability for partners beyond their contributions and equity in firm, except unlimited personal liability for their own wrongful acts and those of persons whom they supervise
3. It provides protection to the assets of the partnership firm.
4. The LLP firms can be registered at the Secretary of the State to available benefits of the limited liability partnership. There is also a facility for an existing firm to convert it into an LLP firm.
5. The management of activities involving the business is in the hands of the members of the partnerships.
6. The practice of double taxation is avoided by dividing tax amount by all the partners. Every partner must file tax according to his situations.
7. Profit gained from the LLP is equally shared by the members of partnership.
8. The regulation ...

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