In a general format of partnership business it is a legal practice that all partners have unlimited liabilities with respect to their business debts and if one person is declared insolvent then the other partners are bound by law to pay for his debts, loans and liabilities from their own personal assets and property.
Limited liability on the other hand is not the same as other partnership concerns; it differs a lot in the liability context from other partnership businesses. With respect to the liability clauses, it is more resembling to the corporation. Limited liability means that partners have limited liabilities with respect to their debts and loans of the firm. One partner is not jointly and severally responsible for the actions and deeds of other partners and that his personal assets will not be used to pay for the liabilities of the firm or other partners. Therefore, every partner in the partnership firm will have limited liability towards the liabilities of the firm and other partners in the firm as well. This is very much same to the limited liability company in which every member of the company is responsible to pay for the liabilities of the company to the extent he has invested into the company. Therefore, a limited liability partnership can be defined in the following words:
Thepartneror investor's liabilityislimitedto theamounthe/she has invested in thecompany. Thissetuptypically prevents each partner from beingheldaccountablefor the wrongdoings of another partner. Although an LLP can be used in manyfields, it is most commonly used inlawor accountingfirms. The laws relating to an LLP differ significantly betweencountries, and even from state to state.
As the definition states that the liability of the partner or investor is limited to the extent of amount he or she has invested in the firm and that this type of partnership prevents one partner for being held responsible for the work of other partners. It is also stated that this partnership can be used in many fields but this sort of partnership is particularly important for professional firms. In professional firms as the size of the firm started to grow and more and more partners were needed to perform the work in the firm, there was a great threat of extra ordinary risk involved in the addition of other partners in the partnership firm where every partner is an agent of other partners and jointly and severally responsible for the work of other partners. Therefore, there is thought to be dire need of forming limited liability partnerships in the professional firms where matters relating to high financial values are very important to the firm and the firm's professional advice is being given relating to those high valued matters. If anything goes wrong due to the recklessness of one partner then other partner should not be held responsible for the wrong doings of that partner. The requirements for the formation and conduction of business as a limited liability company as mentioned in the law of United Kingdom under the respective acts are described in the following paragraphs.
The set up requirements as mentioned in t