An LLP provides limited liability and the partners are still taxed at their individual tax rate which permits the partners to use losses to offset personal income. However, LLPs expand limited liability to every partner involved, general partners and limited partners alike. This serves as a benefit over LPs in that, under this form of business organization, the individuals who may have been considered general partners now have their liability limited to their contributions to the partnership. This essentially means that there is no differentiating the types of partners in an LLP. As well as limiting liability for the general partners, the limited liability partnership allows every partner to “retain ownership and control, dedicating their full-time attention to the operations of the LLP” (Hurt, 2015, p. 599). In contrast to a limited partnership, the partners in an LLP do not have a limit to their management activities. As partners in an LLP, Alex, Bill, Carl, Devon, and Xavier would all have their liability limited to the capital invested in the partnership as well as having full responsibility of management duties for the farm. Comparable to an LP, they would be taxed at their individual tax rate but they all can use losses from the partnership to reduce their taxable …show more content…
The LLLP extends limited liability to the general partner while still affording the ability to control the day-to-day activities. “Limited partnerships and LLLPs are identical” (Mallor et al., 2015, p. 312) aside from this change for the general partner. In this case, Xavier, would still have the benefit of making decisions for the farm operations, but would also have his liability limited to the amount he has invested in the LLLP.
Disadvantages of LLLPs Just as with the limited partnership, the LLLP eliminates the management abilities of the limited partners and places the full range of duties on the general partner. The tax ramifications are the same as those in an LP, with the losses only being applicable to other passive income of the limited partners. Alex, Bill, Carl, and Devon would remain unable to participate in decisions regarding the operations of the farm. Furthermore, any losses that result from the farm operations are restricted and cannot reduce regular