The pros of setting up a Limited Partnership?
Nonetheless, you need to know that a limited partnership has its fair shares of advantages and disadvantages in equal measure. Some of the limited partnership include:
Unlike general partnership where every partner is responsible for the company’s actions that include the company debts, liabilities, and wrongful acts, one of the key benefits of a limited liability partnership is its liability protection rights. This type of partnership helps in protecting other partners’ assets from the negligence of other partners that can lead to the company’s loss.
The limited liability partnership is advantageous on partners especially if the business risks a potential lawsuit on the negligence claims against it by other parties.
Individuals who are the owners of a partnership need to file their personal income taxes to the IRD (Inland Revenue Department), the tax authority in Hong Kong. However, the partnership entity is not responsible for filing its taxes. The credits and deductions that the company has are often passed down to the individual partners for them to file on their individual tax. The process can prove beneficial to partners who have a limited interest in the company or those who have a special tax requirement following their interests in other businesses.
The other significant importance of a limited liability partnership is the fact that it offers flexibility in business ownership. If you are one of the partners in a business, then the good news is that you will have the chance to contribute to the operations of the business. That implies the managerial duties and responsibilities of the company will be equally divided among the partners depending on their experience.
Besides, the company partners who have a financial interest can still decide not to engage in any of the managerial decisions but still maintain their ownership rights according to their percentage of shares in the company. Flexibility can equally prove disadvantageous if the partners make their decision based on their personal interests but not considering the company’s interests.
The Amount of Capital is Generous
Since a limited liability company brings together more than one person who is willing to contribute an amount towards running and managing the business, partnerships thus have a reasonable amount of money that allows them to smoothly run their business. A generous capital is more likely to increase the flexibility of the business as well as a surge in the amount of profit that the company is likely to make.
Easy to start
Unlike other business entities that are a little expensive to start, a limited liability is cheaper to start and operate. Besides, the partners could share responsibilities like capital contributions and managerial roles. Therefore, they do not have to limit the personal liabilities in case anything happens to the business. Further, the partners have an opportunity to increase their profits.
It has no turnover issues
If a Limited Partner wants to exit the partnership company then he or she can do so without necessarily having to dissolve the business. Besides, they can be replaced in an event that they wish so.
The process of forming a corporation is a bit tedious relative to when one is forming a limited liability partnership.