LIMITED

LIABILITY PARTNERSHIP
AARUSH KHURANA
1202
 WHY LLP?
A Limited Liability Partnership (LLP) is a hybrid business structure that combines the advantages of both a partnership
and a company. It offers the flexibility of a partnership with the benefit of limited liability protection, making it an
attractive option for small and medium-sized enterprises, professionals, and entrepreneurs. The LLP model allows
partners to manage their business directly, but at the same time, it shields them from personal liability beyond their
investment in the firm.

The main advantages of choosing an LLP include:

Limited Liability: Protection of personal assets from business liabilities.

Flexibility: Partners can manage the business directly without restrictions.

Separate Legal Entity: LLPs are distinct from their partners, meaning the business can own property, enter contracts, and
be sued independently.

Taxation Benefits: LLPs are not taxed as separate entities like a corporation, reducing the overall tax burden.
 LLP ACT : AN OVERVIEW
The Limited Liability Partnership Act, 2008 (India), governs the formation, regulation, and
dissolution of LLPs. The Act was introduced to offer a business structure that combines the
flexibility of partnerships with the limited liability feature of companies.
The Act defines the essential elements of an LLP, including:

Formation: Requires at least two partners to form an LLP.

Registration: Compulsory registration with the Ministry of Corporate Affairs (MCA).

Legal Framework: Establishes the rights and duties of partners, including management, liabilities,
and profit-sharing.
 DEFINITION
A Limited Liability Partnership (LLP) is a
business structure in which two or more
individuals come together to form a
partnership but enjoy limited liability for
the business's debts. The liability o capital.
 FEATURES
Separate Legal Entity: An LLP is legally distinct from its partners, which means it can enter into contracts, own property,
1 and sue or be sued in its name.

2 Limited Liability: Each partner’s liability is restricted to the amount of capital they have invested in the LLP.
Flexibility in Management: Partners have the liberty to decide how they wish to manage the business, unlike a
3 corporation where management is typically handled by directors.
No Maximum Limit of Partners: There is no upper limit on the number of partners in an LLP, unlike certain company
4 types.

Perpetual Succession: The existence of an LLP is not affected by changes in the partnership (death, insolvency, or
5 withdrawal of partners).

Tax Transparency: LLPs are not subject to income tax at the entity level but pass their profits to partners, who are taxed
6 individually
 COMPARISON
ASPECTS LLP COMPANY PARTNERSHIP
1)LEGAL SEPARATE SEPARATE NO SEPARATE
STATUS LEGAL ENTITY LEGAL ENTITY LEGAL ENTITY
2) LIABILITY LIMITED TO THE LIMITED TO THE UNLIMITED LIABILITY
AMOUNT INVESTED AMOUNT INVESTED
3) NO OF MIN : 2 PRIVATE : 2-200
PUBLIC : MIN MIN : 2
MEMBERS NO LIMIT ON MAX REQUIRED IS 7 MAX : 50
 4) MANDATORY MANDATORY REGISTRATION IS
REGISTRATION UNDER LLP UNDER OPTIONAL UNDER
ACT,2008 COMPANIES ACT PARTNERSHIP ACT

PARTNERS BOARD OF PARTNERS

5) MANAGEMENT
MANAGE IT DIRECTORS MANAGE IT
STRUCTURE
DIRECTLY MAMAGE IT DIRECTLY

6) COMPLIANCE MODERATE HIGH MINIMAL

7) PROFIT BASED ON LLP BASED ON BASED ON

SHARING AGREEMENT PARTNERSHIP
SHARE HOLDING
AGREEMENT
 Normal Partners: These are the general partners in an LLP
who are involved in day-to-day management and share in
NORMAL the profits and losses as per the LLP agreement. They may
PARTNERS or may not be involved in the formal decision-making
process.

Designated Partners: Designated partners are responsible

for managing the LLP and ensuring compliance with legal
obligations. At least two partners of an LLP must be DESIGNATED
designated partners. They are accountable for filing returns PARTNERS
and keeping the records of the LLP in order. Designated
partners must have a DIN (Director Identification NUMBER).
 LLP PROCEDURE
1. OBTAIN DIGITAL 2. OBTAIN DIRECTOR
IDENTIFICATION
3. CHOOSE A
SIGNATURE CERTIFICATE NAME:
(DSC): NUMBER (DIN):
The name should be
All designated Required for
unique and not identical
partners must have all partners. to any existing LLP or
DSC for online filing. company
 4. FILE LLP 5. SUBMIT FORM FILLIP 6. GET
(FORM FOR CERTIFICATE OF
AGREEMENT: INCORPORATION OF LLP): INCORPORATION:
This document outlines This is filed with the Once the form is
the terms, conditions, MCA along with approved, a Certificate
rights, and necessary documents of Incorporation is
responsibilities of the like ID proof and address issued by the Registrar.
partners. It must be filed proof of partners.
with the Registrar of
Companies (ROC).
 LIABILITY OF PARTNERS IN LLP
The most significant benefit of the LLP structure is the limited liability of its partners. Unlike
traditional partnerships where partners are personally liable for the debts of the business, in
an LLP:

Limited Liability: The liability of each partner is limited to their agreed capital contribution
in the LLP. In case of business failure or debts, their personal assets are protected.

No Personal Liability for Other Partners: A partner is not liable for the misconduct or
negligence of other partners.

Exceptions: If a partner commits fraud or criminal activities, they could still be held
personally liable.
 CONVERSION OF LLP
LLPs can be converted from other business forms, such as sole proprietorships,
partnerships, or private companies, and vice versa. The process requires filing the
necessary forms with the Registrar of Companies (ROC), which includes the approval of
the conversion scheme by the partners.

Conversion from Partnership to LLP: Involves drafting a conversion agreement, passing

a resolution, and filing the conversion with the Registrar.

Conversion from Private Company to LLP: Involves passing a special resolution, getting
consent from shareholders, and filing the conversion application with the
ROC.
 DISSOLUTION OF LLP
The dissolution of an LLP can occur under the following circumstances:

Voluntary Dissolution: If the partners decide to dissolve the LLP voluntarily, they must
file a notice of dissolution with the ROC. This usually occurs when the LLP has fulfilled
its purpose, or due to mutual agreement of the partners.

Involuntary Dissolution: The government may order dissolution if the LLP fails to comply
with statutory requirements (such as non-filing of annual returns).

Winding Up: The process of winding up includes settling the liabilities of the LLP and
distributing the assets. Once all the liabilities are cleared, the LLP is formally dissolved
 CONCLUSION
The Limited Liability Partnership (LLP) structure is a highly flexible and
beneficial option for businesses that seek a balance between the simplicity
of a partnership and the legal protection of a company. Its limited liability
feature protects partners' personal assets while offering the freedom to
manage and operate a business. Moreover, the LLP Act, 2008, provides a
clear legal framework for businesses, ensuring smooth functioning,
registration, and compliance. With its potential for scalability, taxation
benefits, and ease of formation, LLP has become a popular choice for
entrepreneurs and professionals.
THE END