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Limited liability partnership (LLP)

Limited Liability Partnership (LLP) is a new corporate structure that combines the flexibility of a partnership and the advantages of limited liability of a company at a low compliance cost. In other words, a LLP is a partnership in which some or all partners have limited liability. In an LLP, one partner is not responsible or liable for another partner’s misconduct or negligence. This is an important difference from that of an unlimited traditional partnership.

Silent Features of Limited Liability Partnership:

  • An LLP is a body corporate which is separate and distinct from its partners. It has perpetual succession.
  • The provisions of Indian Partnership Act, 1932 are not applicable to an LLP and it is regulated by Limited Liability Partnership Act, 2008.
  • Every Limited Liability Partnership shall use the words “Limited Liability Partnership” or its acronym “LLP” as the last words of its name.
  • Every LLP shall have at least two designated partners being individuals, at least one of them being resident in India and all the partners shall be the agent of the Limited Liability Partnership but not of other partners.
  • LLP agreement is not mandatory but in the absence of LLP agreement, mutual rights and liabilities of partners shall be determined as provided under Schedule I to the LLP Act, 2008.

Advantages of forming Limited Liability Partnership:

  • LLP is a different type of business model which operates on the basis of an agreement.
  • LLP has lesser compliance requirements as compared with a company.
  • Ownership can be transferred more easily in accordance with the terms of LLP agreement.
  • Existing partnership firm, private limited company and unlisted public limited company can be converted into LLP by registering the same with Registrar of Companies.
  • As it is a separate legal person, an LLP can sue and be sued in its own name. The partners are not liable to be sued for dues against the LLP.
  • There is no restriction on limit of remuneration to be paid to the partners like companies. However, the remuneration must be authorised by the LLP agreement.
  • No exposure to personal assets of the partners except in the case of fraud.
  • Audit is not required unless capital exceeding Rs. 25 Lakh or turnover exceeding Rs. 100 lakh.
  • LLPs are taxed like general partnership firms. They are exempted from surcharge of 10%. LLPs tax payment is lower than that of company.
  • There is no requirement of any minimum capital contribution.
  • Easy to dissolve or wind-up.
  • Low compliance cost.