What is LIMITED LIABILITY PARTNERSHIP (LLP)?
LLP Features: LIMITED LIABILITY PARTNERSHIP (LLP) is basically a hybrid of a Partnership Firm and a Company. A LIMITED LIABILITY PARTNERSHIP (LLP) is formed with the objective of enjoying the flexibility of doing business as in the case of Partnership Firms along with the limited liability benefit. An LLP consists of features of both a Partnership Firm & that of a Company. The concept of LLP was introduced in 2008 through an Act named “The Limited Liability Partnership Act, 2008 (“LLP Act”)”. A LIMITED LIABILITY PARTNERSHIP (LLP) is an extended form of partnership firm, registered under the Limited Liability Partnership Act, 2008 (“LLP Act”), in which some or all partners have limited liabilities as agreed mutually & are similar as that of the shareholders of a Company. We will highlight some of the important features of LLP below.
Salient features of LIMITED LIABILITY PARTNERSHIP (LLP) is as follows:
Low Compliance Cost:
Low Compliance Cost: Low Compliance Cost is one of the most attractive features of a Limited Liability Partnership. LIMITED LIABILITY PARTNERSHIP (LLP) is governed by Ministry of Corporate Affairs (MCA). An LLP needs to file two Forms with MCA throughout the year. As compared with Company, the MCA Compliance is very less. Also, turnover limit for Audit of LLP is Rs. 40 Lakhs and if the contribution exceeds Rs. 25 lakhs for Statutory Audit is one of the important feature of an LLP.
Artificial Juridical Person:
An LLP is an artificial legal person because it is created by law and is covered with all rights of an individual. An LIMITED LIABILITY PARTNERSHIP (LLP) can do everything which any natural person can do, except that, it cannot go to jail, cannot take an oath, cannot marry or get a divorce. LLP distinguished as Artificial Juridical Person is one of the most eye-catching features of Limited Liability Partnership. In terms of liability under Limited Liability Partnership, the LLP is liable for losses or debts if arise in running the business where the individual members or partners of the LLP shall not be liable for such losses or debts.
3. Perpetual Succession:
An LIMITED LIABILITY PARTNERSHIP (LLP) is an going concern and continue to exist irrespective of Death, insanity, retirement or insolvency of partners. Another important feature of LLP is, it can on its own enter into contracts and can own property in its name.
4. Minimum and Maximum number of Partners :
An LIMITED LIABILITY PARTNERSHIP (LLP) should have at least two individuals as Designated Partners, out of which one should be resident of India. The Partnership Firm doesn't have a maximum limit of partners.. No limitation on number of members is one of the best feature of LLP as it allows scalability in business to unlimited extent.
5. LLP Agreement:
An LIMITED LIABILITY PARTNERSHIP (LLP) is governed by LLP Deed. The Rights and Duties of the Designated Partners or Partners are mentioned in the LLP Deed. By virtue of this feature of an LIMITED LIABILITY PARTNERSHIP, All the Partners or Designated Partners entering into LLP are binded by the clauses of the LLP Deed.
6. Liability of Partners:
One of the highlighted feature of Limited Liability Partnership is that the liability of Partners is limited to their contribution of share in the business. A partner is liable for his own wrongful acts or deeds. One Partner is not responsible for the acts of others due to negligence or misconduct or illegal activity. Limited Liability of Partners or Designated Partner is one of the important feature of an LLP.
7. Common Seal
An LLP being an artificial person is not with a body of natural being. Therefore, it can act only through its partners or designated partners. LLP should have a common seal, if it decides to have one. A common seal of the LLP should have its name engraved along with the place and date of its incorporation. It may be used by a LLP as a symbol for its own incorporation. Having common seal is a distinct feature of an LLP. The Common Seal shall remain under the custody of some responsible official and it shall be affixed in the presence of at least 2 designated partners or Partners of the LLP.
An LLP is the form of organization which is best suited for a startups as it possesses features of a Company but comes Low Cost and flexibility of doing business.
