Advantages and Disadvantages of (General, New partners, Limited Partners, Limited Liability Partnership. DO NOT ONLY RELY ON QUIZLET GO TO SLIDES! Some information missing that is on the slides.
Disadvantages of Limited Liability Partners (LLP)
1. Can only be formed in strict compliance with state statutes, so harder to form than general partnerships. 2. Still, have a fiduciary duty; owe each other duty of care and loyalty. 3. some states require certain liability insurance in place. 4. some states require renewal of LLP status every year. 5. some states limit what types of business may be operated as LLP, such as law, medicine, accounting. In those states, not all businesses can be LLP. 6. some states have burdensome paperwork requirements, like annual reports, renewals, etc. 7. Liability can still be imposed on partners for actions of those whom they supervise.
Advantages of General Partnership (GP)
1. Ease of formation; does not require filing through the state or local agency. 2. Flexible management; shared responsibilities. 3. Ease of rising Captial; by unanimous consent for new partners. 4. Pass-through taxation; partners do not pay federal income tax.
Disadvantages of Limited Liability (LL)
1. Limited control/no management authority. 2. General Partners still have unlimited liability even though limited partners do not. 3. Additional formalities and expenses for organizing this type of entity.
Advantages of Limited Liability (LL)
1. Limited liability; protection from individual liability. 2. Attracting Capital; wealthy individuals can invest without taking on the liability of a general partnership; new limited partners can be added easily. 3. Easy transferability of interest; Limited and general partners can transfer their interests to others; however, the person to whom the interest is transferred becomes a limited, not a general partner (unless all other partners consent otherwise) and LPs can easily withdraw from the partnership and demand a return of their contributions. 4. Continuity of existence; LPs do not automatically dissolve upon withdrawal of a general partner as long as there at least one gen partner remaining. Also, withdraw of a partner does not usually impact continuity since they do not manage the business. 5. Pass-through taxation; Limited partnerships have pass-through tax treatment; limited partnership doesn't pay taxes. Only individual partners do.
Advantages of Limited Liability Partners (LLP)
1. Reduction in liability for other people's actions. 2. Same advantages found in general partnership re; sharing management duties (allowed to manage, not just invest), ability to raise capital by adding new partners. 3. Pass-through tax status.
Disadvantages of General Partnership (GP)
1. Unlimited personal liability; each partner is liable for his/her assets seized by creditors. 2. Joint and several-liability; each partner is entirely liable for all obligations. 3. Lack of continuity; 4. Difficulty in transferring partnership interest; the only transferable property a partner has is his share of the profits. An individual cannot transfer other interests without consent from all the other partners.
