Concept of LLP
Limited Liability Partnerships (LLPs) are commercial vehicles which combine the features of partnership and company form of business .The concept of Limited Liability Partnership (LLP) has been introduced in India by way of Limited Liability Partnership Act, 2008 (notified on 31st March 2008).
A Limited Liability Partnership combines the advantages of both the Company and Partnership into a single form of organization. In an LLP one partner is not responsible or liable for another partner’s misconduct or negligence. 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.
LLP – A Separate Legal entity
LLP is a separate legal entity, liable to the full extent of its assets; the liability of the partners would be limited to their agreed contribution in the LLP. Further, no partner would be liable on account of the independent or un-authorized actions of other partners, thus allowing individual partners to be shielded from joint liability created by another partner’s wrongful business decisions or misconduct.
Advantages and Disadvantages of LLP
· Separate legal entity
· Easy to establish
· Flexibility without imposing detailed legal and procedural requirements
· Perpetual existence irrespective of changes in partners
· Internationally renowned form of business in comparison to Company
· No requirement of minimum capital contribution
· No restrictions as to maximum number of partners
· LLP & its partners are distinct from each other
· Partners are not liable for Act of other partners.
· Personal assets of the partners are not exposed except in case of fraud.
· Easy to dissolve or wind-up
· Professionals like CS / CA / CWA / Lawyers can form Multi-disciplinary Professional LLP
· No requirement to maintain statutory records except Books of Accounts
· Less Cost of formation (Compared to a company)
· LLP cannot raise funds from Public
· Any act of the partner without the other may bind the LLP.
· Under some cases, liability may extend to personal assets of partners.
· No separation of Management from owners
Partners / Designated Partners of LLP
An LLP should have minimum 2 partners. Every LLP should have minimum 2 designated partners who are individuals and at least one of them should be resident in India.
Partner of LLP can be consisted of
a) Companies incorporated in and outside India
b) LLP incorporated in and outside India
c) Individuals Resident in and outside India
Designated Partner of LLP shall be responsible for the doing of all acts and things that are required to be carried out by the LLP and is responsible for the compliance of the provisions and filing of document / returns/ statements of LLP Act and as may be specified in the LLP agreement
Designated Partner shall be liable to all penalties imposed on the LLP for any contravention of provisions of LLP Act.
Designated Partner Identification Number (DPIN)
A person or nominee of a body corporate, intending to be appointed as who is appointed as designated partner of LLP should hold a Designated Partner Identification Number (DPIN) allotted by the Ministry of Corporate Affairs.