All you need to know about a Limited Liability Partnership
A Limited Liability Partnership is a hybrid business organization which fills the gap between a company incorporated under Companies Act, 2013 and a partnership firm incorporated under Indian Partnership Act, 2009. It adopts a corporate form with organizational flexibility and tax status that of a partnership firm with advantages of limited liability of its partners.
What is Limited Liability Partnership?
A Limited Liability Partnership is a hybrid business organization which fills the gap
between a company incorporated under Companies Act, 2013 and a partnership firm
incorporated under Indian Partnership Act, 2009. It adopts a corporate form with organizational flexibility and tax status that of a partnership firm with advantages of limited liability of its partners.
A LLP is body corporate formed and incorporated under the Limited Liability Partnership
Act, 2009 which is a distinct legal entity separate from its partners and is most favorable
for professionals and non – business fields.
Characteristics of a Limited Liability Partnership.
Restriction on number of partners.
Every LLP shall have at least two partners and shall have two individuals as
‘Designated Partners’, of whom at least one shall be a resident in India. There is
no upper limit on the number of partners of a LLP, as in the case of a partnership
firm where the maximum threshold for the number of partners is 20.
Rights and Duties of partners and agreement.
The mutual rights and duties of partners of an LLP inter se and those of the LLP
and its partners shall be governed by an agreement between partners or between
the LLP and the partners subject to the provisions of the Act. The Act provides
flexibility to devise the agreement as per their choice. In the absence of any such
agreement, the provision of law (Schedule I) shall govern the mutual rights and
duties.
Liability of LLP/Partners.
The LLP will be a separate legal entity, liable to the full extent of its assets, with
the liability of the partners being limited to their agreed contribution in the LLP,
which may be of tangible or intangible nature or both tangible and intangible in
nature. No partner would be liable on account of the independent or unauthorized
actions or other partners or their misconduct.
Registration.
It is compulsory for a limited liability partnership to get registered as per the
provisions of the Limited Liability Partnership Act, 2009.
Taxation of LLPs.
For the purpose of taxation, LLPs will be treated as a ‘firm’ as defined in the
Indian Partnership Act, 1932 [as per the Finance Act, 2009].
Perpetual Succession.
The LLP will have perpetual succession like a corporation. The LLP shall
continue to exist till its wound up in accordance with the provisions of the
relevant law.
Conversions of other entities into LLP.
Other business entities like a firm or a company may convert themselves into an
LLP. The LLP Act, 2009 contains enabling provisions pursuant to which a firm
and private company or unlisted public company would be able to convert
themselves into LLPs. But, the LLP Act bars an LLP from converting it into a
company despite provisions in the Companies Act which enable an LLP to
convert itself into a company.
Conclusion
The economic downturn has adverse effects in the economies of most of the countries,
including India. In such a situation, availability of LLP as an alternative business vehicle
to our trade and industry will be an important step. Service industry has grown
considerably in India. The concept of LLP has assumed a high significance due to today’s
borderless economies, the growing role of service and knowledge based enterprises and
emerging international competition. Indian entities also need to have the requisite choice
in corporate organizations to compete and survive internationally.
WRITTEN BY- RAHUL
