Limited Liability Partnership
Limited Liability Partnership (LLP)
The concept of LLP was introduced when the Limited Liability Partnership Act, 2008 came into force. LLP is an alternative corporate business form that gives the benefits of limited liability of a company and the flexibility of a partnership. The LLP can continue its existence irrespective of changes in partners. It is capable of entering into contracts and holding property in its own name. The LLP is a separate legal entity, is liable to the full extent of its assets but liability of the partners is limited to their agreed contribution in the LLP. Further, no partner is liable on account of the independent or un-authorized actions of other partners, thus individual partners are shielded from joint liability created by another partner’s wrongful business decisions or misconduct.
|Not a Legal Entity||Legal Entity||Legal Entity|
|Minimum 2 Partners||Minimum 2 Partners||Minimum 2 Directors in case of Private Limited Company and 3 in case of Public Limited Company.|
|Maximum 20 Partners||No Limit||Maximum 15 directors.|
|Partners are jointly liable||To the extent of Their contribution||Company is a separate legal entity. The directors are liable only to a certain extent.|
|Registration is not compulsory||Compulsory||Compulsory|
|BS etc. need not be filled||Filling is compulsory||Filling is compulsory|
|Audit is not Compulsory||Compulsory if Turnover is Rs.40 Lakhs or contribution is Rs. 25 Lakhs||Audit is compulsory|
|Name may be any||Must be approved by Registrar and must have LLP as suffix||Must be approved by Registrar|
|Minor can become Partner||Minor cannot become Partner||Minor cannot be a director of the Company.|
Following are the advantages for incorporating a LLP:
Audit is not required for a LLP annual sales turnover is less than Rs.40 lakhs and the LLP has a capital contribution of less than Rs.25 lakhs. Whereas, for a Private Limited Company, audit is mandatory irrespective of sales turnover or capital.
LLP there is no concept of dividend distribution tax.
In LLP, there is no concept of Board Meetings or Annual General Meetings. So annual compliance is comparatively lesser.
The government fee for incorporation of LLP is significantly lower than the government fee for incorporation of private limited company.
The process for incorporation of LLP also involves less documents and is less cumbersome.
* The nature of a limited liability partnership firm is that of a body corporate
* It has a legal entity separate from its partners.
* It has perpetual succession.
*Any change in the partners of a limited liability partnership shall not affect the existence, rights or liabilities of the limited liability partnership.
Thus, forming a limited liability partnership firm is more favourable.
However, that individual shall not be capable of becoming a partner of a limited liability partnership, if –
(a) he has been found to be of unsound mind by a Court of competent jurisdiction and the finding is in force;
(b) he is an undischarged insolvent; or
(c) he has applied to be adjudicated as an insolvent and his application is pending.
“Body Corporate” includes the following-
(i) a limited liability partnership registered under this Act;
(ii) a limited liability partnership incorporated outside India; and
(iii) a company incorporated outside India,
but does not include –
(i) a corporation sole;
(ii) a co-operative society registered under any law for the time being in force; and
(iii) any other body corporate or a limited liability partnership, which the Central Government may, by notification in the Official Gazette, specify in this behalf.