Limited Liability Partnership
What is Limited Liability Partnership (LLP) ?
A limited liability partnership is a legal entity, liable for the full extent of its assets.
The concept of Limited Liability Partnership (LLP) has been introduced in India by way of Limited Liability Partnership Act, 2008.
In LLP, company becomes a separate entity and it remains perpetual even if the original owners leaves the company or something else.
In an LLP, all partners have limited liability for each individual’s protection within the partnership, similar to that of the shareholders of a limited company. However, unlike the company shareholders, the partners have the right to manage the business directly. An LLP also limits the personal liability of a partner for the errors, omissions, incompetence, or negligence of the LLP’s employees or other agents.
Features of Limited Liability Partnership (LLP):
1. Every Limited Liability Partnership must have at least two designated partners. And one of the designated partner should be resident in India. There is no maximum limit on the number of maximum partners in the entity
2. Perpetual Succession
3. LLP Agreement
4. Artificial Legal Person
5. The liability of each partner is limited
6. It is a separate legal entity
Why Limited Liability Partnership (LLP)?:
1. It operates based on an agreement
2. It is easy to dissolve or wind-up
3. It has a flexible capital structure
4. By pooling resources, the partners lower the costs of doing business while increasing the LLP’s capacity for growth
5. A partnership agreement exists for an LLP, partners can be added or retired as outlined by the agreement. LLP has the ability to bring partners in and let partners out.
6. Less restriction and compliance
7. Internationally renowned form of business in comparison to Company
FAQS
Any individual, or even a company or an LLP, can become a partner. However, only an individual can become a ‘designated partner’ in an LLP.
An LLP can be started with any amount of money there is no such minimum requirement. A partner may contribute both tangible and intangible property.
A Limited Liability Partnership must have a minimum of two Partners and an LLP can have any number of Partners.
An LLP agreement is made between the partners and the LLP regarding the relationship between the individual partners in the LLP. An LLP agreement usually consists of management policies, the inclusion of new partners, policy-making strategies, and so on.
FDI is allowed under automated route in an LLP by the Foreign Investments Promotion Board (FIPB). Note: Foreign Institutional Investors and Foreign Capital Investors are not allowed to invest in LLPs.