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Deciding you want to open your own business is a huge step towards your future. It takes guts, courage, and a whole lot of work to be a successful entrepreneur, and it may just end up being the best decision you make. With that said, deciding to open your own business is only half the battle; there are the logistics that you also need to worry about, and you need a complete business plan. So, as you start to figure out the business plan, one of the first things you’re going to need to think about is the actual structure of your business.
An LLP or a Limited Liability Partnership is a very common type of business to pursue. But just because it’s common, doesn’t mean it’s automatically right for you. Let’s take a closer look at some of the main pros and cons of an LLP.
The Pros of an LLP
Let’s begin with the pros of an LLP. This is really ideal for those companies that have a partnership that they want a protected liability on. It’s almost a blend of partnerships and corporations. The idea is that one partner of the company is not liable for the misconduct or negligence of the other partner. The liabilities are in fact limited and are based on the investment they made in the company, not the overall debt.
Then there is the fact that an LLP offers separate legal entities. What this means is that the partners can own a property and also move forward with suing as a way to protect their own interest.
There is also the fact that an LLP is able to take advantage of a wide range of tax benefits – the very same benefits that are offered to partnerships.
Because the tax benefits can seem a little confusing and overwhelming to those just starting out, it makes sense to connect with a company like Goodman Jones who don’t just take on the role of an accountant, rather they take a close look at your specific business and industry and look for ways to improve its financial performance. Goodman Jones can help with everything from a gift aid small donations scheme, to how to ensure your company survives the current climate during COVID-19, cross-border obligations and arrangements, and so forth.
What About the Cons?
Just as there are some obvious pros to an LLP, there are also cons to be aware of. These can include:
- You will need to pay employee taxes based on each person’s income
- Typically, there is more paperwork involved with setting up an LLP
- There needs to be at least one general partner
Let’s not forget there is a minimum number of two people in an LLP, which means that if one decides to leave the business, the LLP could be looking at dissolution. Then there is the fact that all the LLP accounts have to be put on public record, which for some can seem like a con.
These are just a few of the basics when it comes to the pros and cons of LLP, which is why it’s so important to do as much research in advance as possible.
You may also like: Top Reasons to Bring on a Business Partner
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