A LLP is a special type of partnership that can be used by business organizations owed by certain type of professionals

By on 13-11-2018

A BRIEF INTRODUCTION TO LIMITED LIABILITY PARTNERSHIP

• Meaning

 A LLP is a special type of partnership that can be used by business organizations owed by certain type of professionals such as company secretaries, chartered accountants, cost accountants, lawyers, engineers, doctors, consultants, etc, who are not allowed to use corporation form of entity to limit their liability. LLP is generally set up for carrying on a partnership consisting of partners carrying on practice in one or more eligible professions, etc

The partners in the LLP may be individual practitioners in these professions or professional corporations

• LLP is a body corporate

 Section 2 (1)(d) of the LLP Act, 2008 provides that a LLP is a body corporate formed and incorporated under this Act and is a legal entity separate from that of its partners and shall have perpetual succession. Therefore any change in the partners of a LLP shall not affect the existence, rights or liability of the LLP.

• Easy in and easy exit

 The LLP structure is more suitable for a group of people engaged together in a property or finance venture when it is necessary to account for partners coming and going more frequently than in a normal partnership business.
A LLP is unlikely to be useful for a small trading company of any sort because a conventional limited company is likely to perform an appropriate role at less cost.

• Essential elements to incorporate LLP

 Under the LLP Act, 2008, the following elements are very essential to form a LLP in India:

(i) To complete and submit incorporation document in the form prescribed with the Registrar electronically;

(ii) To have atleast two partners for incorporation of LLp and its continuation thereof;

(iii) To have registered office in india to which all communications will be made and received;

(iv) To appoint minimum two individuals as designated partners who will be responsible for number of duties including doing of all acts, matters and things as are required to be done by the LLP;

(v) To execute a partnership agreement between the partners inter se or between the LLP and its partners. In the absence of any agreement the provisions as set out in First Schedule of LLP Act, 2008 will be applied.

• Characteristics of a LLP

 LLP restered with the Registrar under the LLP Act, 2008 has the following characteristics
(i) Separate legal entity

(ii) Incorporated body

(iii) Artificial legal person

(iv) Limited liability

(v) Common seal

(vi) Right to own property

(vii) Right to enter into contracts

(viii) Right to sue

(ix) Governed by partnership agreement (if any) or Schedule I provided in LLP Act, 2008

(x) Liberty to transfer interest in LLP.