Limited Liability Partnership (LLP) Act, 2008

Act Limited Liability Partnership Act, 2008, is an Indian Act that brought in the idea of Limited Liability Partnership (LLP)s. It provides legal resolution to the business structures that comprise partnership and corporal firms. There are also a range of pvt ltd corporate in my locality, which facilitate operations and lower compliance overheads, and thus LLPs are becoming a more appealing choice to many companies.

Key Features of LLPs

• Separate Legal Entity: An LLP is an entity of its own, different from the individuals who are partners in it.

• Limited Liability: Members in a partnership have their liability limited to what they invested in the business.

• Flexibility: FPs and LLPs can adapt their internal organization and the way they are managed.

• Perpetual Succession: Among the advantages of an LLP is that the firm survives legal changes in partners.

• Designated Partners: At least two people must be named designated partners, with one of them living in India.

Benefits of LLPs

• Limited Liability: The only assets partners can lose are their investments in the business.

• Tax Benefits: Tax-saving opportunities may be greater for partnerships than for corporations.

• Flexibility: This means you can set up partnerships that are right for your needs.

• Ease of Formation and Management: It is simpler to establish and manage a partnership than it is to create and manage a corporation.

Learn more about : Limited Liability Partnership

Structure of an LLP

• Partners: Two partners are necessary to start a company.

• Designated Partners: Responsibility for keeping the company compliant with laws lie with the Designated Partners.

• Partnership Agreement:  Sets out what partners can do, must do and must avoid doing.

Comparison with Partnership and Company

Important Provisions of the Act

• Registration and then Incorporation

• Capital Contribution

• Partnership Agreement

• A Designated Partnership is operating as a Limited Liability Partnership.

• What Partners Are Responsible For

• Meetings are a key feature and so is managing accounts.

• Dissolution

Advantages of a Limited Liability Partnership (LLP)

• Separate legal entity : A LLP has its own legal personality that is similar to that of a company. The structure of the organization of the LLP is independent of the member contributors. The LLP has the right to be sued and subjected to legal action through its own name of business. Contracts signed by the LLP with the name of the company assist in creating trust with the stakeholders and motivating clients and suppliers to have faith in the company to engage in business with them.

• Limited liability of the partners : Some of the members of LLP they bear the financial responsibility not as investors but solely as a result of their investment. The liability of each partner is limited to the amount of capital that he/she donated at the time of forming the partnership. The amount of contribution made by the partners is the utmost liability to them since they are not subjected to the personal liabilities of the business. This leads to the assets of the establishment settling the business liabilities during the period of closure of an LLP where partners are not exposed to unlimited liability. 

• Low cost and less compliance : An LLP's formation expenses remain lower than those of establishing either a public limited company or private limited company. There are few requirements an LLP has to adhere to. Two necessary annual documents compose the LLP's filings: Annual Return together with Statement of Accounts and Solvency.

• No requirement of minimum capital contribution : It does not have a minimum required capital in the formation of an LLP. Any form of company may incorporate without any minimum paid up capital. Any amount of capital contributed by the partners will make the LLP be formed.

Disadvantages of a Limited Liability Partnership (LLP)

• Penalty on non-compliance : Their major burden is the Minimal standards of compliance established on LLP organizations. Failure to adhere to necessary tasks in time will attract huge fines on LLP legal entities. LPPs that are not in operation of business have to provide annual returns to the Ministry of Corporate Affairs (MCA). The government will impose very harsh penalties on the LLP when it does not file its obligatory returns.

• Winding up and dissolution of LLP : LLPs require two or more partners in order to present their operations. It will automatically dissolve the company in case the number of partners decreases to less than two within six consecutive months.

• Difficulty to raise capital  : The LLP omits shareholder constructions found in company structures but it is transactional to other SSU entities. Angel investors and venture capitalists are not allowed to join the shareholders of LLP structure. Every shareholder must be LLP partner to receive full partner rights that would involve all the liabilities of partnerships. Favorable inclination by angel investors and venture capitalists to invest in firm rather than LLPs and the implication of such choices is that business organizations operating under LLP will face problems with capital financing.

The Process of converting LLP into a Private limited Company

• LLP vs Partnership

• Limited Liability Partnership

• Separate Legal Entity

• Limited Liability

• Flexibility

• Perpetual Succession

• Designated Partners

• Property Tax Benefits

• Ease of Formation

• Management

• A number of the proceduresorges to transform as a public company into a private company.

• No Equity Investment

• Trademark Registration Process

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