What is LLP?
1. Limited Liability Partnership (LLP) is a popular and well known business structure in India. The concept of Limited Liability Partnership (LLP) was started in India by way of the Limited Liability Partnership Act, 2008. The basic premise behind the introduction of Limited Liability Partnership (LLP) is to provide a form of business entity that is simple to maintain while providing limited liability to the owners.
2. With an easy incorporation process and simple compliance formalities, LLPs are preferred by Professionals, Micro and Small businesses that are family-owned or closely-held. Since LLPs are not capable of issuing equity shares, LLP should not be chosen for any business that has plans for raising equity funds from Angel Investors, Venture Capitalist or Private Equity Funds
3. LLP is a separate legal entity that gives the benefit of Private Limited company plus the flexibility of partnership Firm, wherein no partner is held liable on account of others partner’s misconduct and their rights and duties are governed by LLP agreement. LLP can also become a member in another Company.
What are the features of LLP?
1. Separate Legal Entity: LLP is a body corporate and separate legal entity from its partners having perpetual succession. It can own assets in its name, sue and be sued.
2. Minimum and Maximum Number of Partners: Minimum 2 partners are required to incorporate a LLP. There is no limit on maximum number of partners.
3. No liability for negligence of other partner: The main advantage of LLP is that no partner can be held liable for negligence or misconduct of other partners.
4. Limited Liability: Partner’s liability is limited to the extent of agreed contribution (capital) in the LLP Agreement except in case of fraud.
5. Perpetual Succession: Unlike a general partnership firm, a limited liability partnership can continue its existence even after the retirement, insanity, insolvency or even death of one or more partners.
6. Business for Profit Only: Limited Liability Partnerships cannot be formed for charitable or non-profit purposes. It is essential that the entity is formed to carry on a lawful business with a view to earning a profit.