Meaning

The Parliament of India passed the Limited Liability Partnership Act in 2008 to govern LLP businesses in India. According to Section 2 of this law, an LLP is a partnership registered under the Act. Further, an LLP agreement means a written agreement either between an LLP’s partners or between the LLP itself and its partners. This agreement defines the rights, liabilities, duties, and powers of the partners.

Since the Limited Liability Partnership Act, 2008 specifically governs limited liability partnerships in India, the provisions of the Indian Partnership Act, 1932 are not applicable to LLPs. They only apply to traditional partnership firms.

Features

Partners of typical partnership firms have unlimited liability towards their collective debts and legal consequences. This means that their own assets are liable for attachment for meeting the firm’s debts and liabilities. And limited liability partnerships (LLP) solves this problem.

An LLP has all basic features of a regular partnership firm, except that of same legal entity status and unlimited liability of partners. Consequently, limited liability partnerships have legal existence and identity separate from that of its partners. Furthermore, its partners have limited liabilities.

The salient features of LLP Act, 2008, inter alia, are as follows

• It is a body corporate with separate legal entity from its partners. The mutual rights and duties of the partners of an LLP are governed by LLP Agreement.
• LLP is liable to the extent of its assets. Partner’s liability is limited to the extent of agreed contribution (capital) in the LLP Agreement.
• No partner is liable on account of the independent or unauthorized action of other partners or for their misconduct.
• Every LLP should have at least two partners with at least two individuals as “designated partners”, of whom at least one must be resident in India. Only designated partners are responsible for compliance with the Act.
• A firm, private company or an unlisted public company can be converted into LLP.
• The Act empowers Central Government to apply provisions of the Companies Act, 1956 as appropriate, by notification with such changes as deemed necessary, in the LLP Act, 2008.
• The winding up of LLP is either voluntary or by the High Court.

Procedure

• Step 1: Obtain DSC
• Step 2: Apply for DIN
• Step 3: Name Approval
• Step 4: Incorporation of LLP
• Step 5: File LLP Agreement

For any kind of assistance, contact Mr.Manohar B V, FCA, MCom @ manohar@mbvca.in / 9916870055