Need for LLP

 For a long time, a need has been felt to provide for a business format that would combine the flexibility of a partnership and the advantages of limited liability of a company at a low compliance cost. The Limited Liability Partnership format is an alternative corporate business vehicle that provides the benefits of limited liability of a company but allows its members the flexibility of organizing their internal management on the basis of a mutually arrived agreement, as is the case in a partnership firm. This format would be quite useful for small and medium enterprises in general and for the enterprises in services sector in particular. Internationally, LLPs are the preferred vehicle of business particularly for service industry or for activities involving professionals. An LLP is similar in some ways to a standard Partnership, except that the individual members have lower liabilities to any debts which may arise from running the business. There are more administrative duties involved compared to the Partnership business structure.

In fact, an LLP is more similar to operating a Limited Company. In terms of liability, the Limited Liability Partnership is itself liable for debts run up in running the business, rather that the individual members of the LLP. As a result, LLP's are only recommended for profit running businesses. Individuals or existing businesses can be members of a Limited Liability Partnership, and the LLP must have at least 2 members. The rights and responsibilities of all members would usually be laid out in a "Deed of Partnership”. The LLP would typically select a "Designated Member" (or members) who would be responsible for maintaining communications with Companies House, preparing accounts and acting for the LLP if for some reason it is dissolved further down the line.