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Law firms have traditionally operated as general partnerships. Why might a limited liability partnership be a...

Law firms have traditionally operated as general partnerships. Why might a limited liability partnership be a good choice of entity for a law firm partnership? What are some possible drawbacks?

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Answer #1

In general partnership, partners remain personally liable to the deeds of other partners. Now those deeds could be any sort of fraudlent activities.

A LLP protects the partner from this personal liability for other partners' acts. That is why it might prove a good choice for a law firm partnership.

Following drawbacks may be associated with LLPs;

1. in some countries LLPs must have at least one person as 'general partner' who has unlimited liability.

2. LLPs must always be registered which involves money and time.

3. Secrecy of affairs is not easy in a LLP.

4. Due to limited liability of firm and its partners, credit worthiness of the firm will be reduced.

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