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The creation of an LLP’ requires the minimum of a general partner and a limited partner. The duties, rights and obligations of these members are similar in status to those of the partners in a general partnership. Because of the limited amount of contribution exposed to the risks of investment, the limited partners are considered more as investors than partners. in addition to the fact that they are not required to participate in the management of the business (LeRoy amp. Jentz, 2009). After the 20 July 2000, when the Limited Liability Partnership Act 2000 was accorded the Royal Assent, the LLP’s were introduced as the latest business vehicle across the United Kingdom beginning 6 April 2001. This date was during the Inland Revenue tax year associated with the taxation structure adopted for LLP’s. Consequently, the increase in limited liability partnerships in entirely linked with the unique tax advantages available for the partners/members. Profits and losses can be directly passed with certain limitations to the partners because the limited partnership is not taxed as a separate legal entity. …
According to Arthur and Sheffrin (2003, p. 183), the LLP is made of distinct partners due to the statutory rights and responsibilities accorded to both limited and general partners. However, the difference between the rights and responsibilities of general partners in a limited partnership against those of a general partnership should be stipulated in the statute and the partnership agreement. Because of the ‘limited’ nature of limited partners, general partners become personally responsible for the obligations and debts of the company (Wood, 1997). The limited partners of a LLP are entitled to specific rights and responsibilities. Considered a ‘limited’ party, the limited partner enjoys fewer rights and hence has fewer responsibilities than the general partners. Their limited liability means that their risk is limited to the investment amount in the LLP. Unlike other partners, the interest of a limited partner is perceived as personal property. For instance if the partnership owns land, the limited partner will have an interest in the limited partnership and not the title to the assets. According to Emerson (2009) partners in a general partnership are allowed to participate in the management of the company. while limited partners attempting to participate in the control of the partnership face the risk of losing his/her limited liability status. According to the Revised Limited Partnership Act, specific responsibilities and powers are outlined through which a limited partner will lose their limited liability. Some of which include attending partners’ meetings. proposing or pursuing a derivative action in place of the company. acting as surety or representing a guarantee for the company.