In: Economics
in the usa
a.Then explain to him what is a Limited Liability Partnership? What responsibilities and liabilities do the partners have for themselves individually, to the firm/to each other in the firm and to the public?
d. Explain to Jim if he needs additional capital to begin his new company what are some ways he could finance his new company?
Part (a)
In limited liability partnerships, the partners have less than full liability for the actions of other partners, but full liability for their own actions. One reason for the development of the LLP was that a growing number of national professional firms needed a partnership-like organization that could operate across state lines but not impose vicarious liability on its owners.
The initial motivation for the inception of the LLP was a strong desire to limit the personal liability exposure of professionals (especially accountants and lawyers) who have traditionally done business as partnerships. LLPs are governed mainly by the statutes of the state in which the entity is formed, more specifically by special provisions within the Uniform Partnership Act as adopted in each state. Most states have amended their partnership acts by adding special provisions.
Partial shield statues are designed to protect individual partners from incurring personal liability for partnership debts and obligations arising specifically from the negligence and wrongdoing of other partners. Full shield statues states that obligations of the partnership belong solely to the partnership and that partners are not personally liable for any partnership obligations.
Each partner is protected from personal liability for partnership debts and obligations incurred due to the wrongdoing of other partners (partial shield states). Each partner is protected from personal liability for partnership debts and obligations, unless the partnership obligations was incurred due to his or her own wrongdoing (full shield states).
Partners are personally responsible for partnership obligations incurred due to their own wrongdoing. Like any general partnership, the partnership may discontinue on the death or disability of one of the partners. A partner’s interest in a limited liability partnership is not freely transferable.
Limited liability partnerships are not subject to federal income taxation. Income is available to the partners. Unlike sole proprietorships and general partnerships, limited liability partnerships have the ability to attract investors who accept no personal liability.
Part (b)
Sources of finance for LLPs