"A limited liability partnership has some of merits of a company and a partnership". Examine the statement.
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Answer:
Merits of Limited Liability Partnership
1. Tax benefits
In LLP, the partnership is not liable to pay taxes. The individuals can file taxes like self-employment tax, personal income tax, etc. This paves the way for individual tax returns. The percentage of partnership each partner has is taken into consideration when the deductions are divided.
2. Limited liability
Generally in partnerships, each partner is legally responsible for the debts and liabilities of other partners and the company. But LLP offers protection to the partners from being responsible for the wrongdoings of other partners. They are also free from any liability for the downfall of the company.
3. Number of partners
This is not limited to an LLP. Any number of partners can be involved in the business. This becomes helpful if the business faces any issues. The amount can be distributed to the huge number of partners and each will have a lesser liability of the debts.
4. Flexibility
LLP is usually flexible in nature. The partners have complete freedom to decide about the percentage of their partnership. How much they want to contribute is also their choice. The partners can opt-out of any business meetings if they wish so. There is no compulsion in anything.
5. Separate entity
An LLP has a separate existence from its partners. And this limited liability partnership is a legal entity. Thus, LLP earns more respect when compared to other partnerships. The customers are more satisfied and confident in dealing with LLP. The same is the case with large organizations also. Their interest towards LLPs is noteworthy.