MODULE 5 LIMITED LIABILITY PARTNERSHIP ACT 2008

Limited Liability Partnership:

• Limited liability partnership is a combination of both partnership and corporation. It has the features of
both these forms.
• As per the Act, LLP means a partnership formed and registered under the act.
• All limited liability partnership is governed under the limited liability partnership act 2008.
• In India LLP was introduced in April 2009.

Features or Nature or Characteristics of LLP

1. Legal entity: The LLP shall be a body corporate formed and incorporated under the LLP Act 2008, and has
a legal entity separate from its partners.

2. Perpetual Succession: It has a continuous existence. Any change in the partners of LLP shall not affect the
existence, rights and liabilities of the LLP.

3. Number of partners: Every LLP shall have at least two partners and shall also have at least two individuals
as designated partners of whom at least one shall be resident in India. There is no maximum limit to the
number of partners are concerned.

4. Type of partners: Any individual or body corporate may be a partner in LLP.

5. Rights and duties of partners: Mutual rights and duties of the partners are governed by the agreement
between the partners.

6. Partners as agent: Every partner of a LLP is for the purpose of the business of the LLP, the agent of the
LLP but not of other partner.

7. Limited liability: The liability of the partners of LLP are limited only to the amount contributed by them.

8. Name of the firm: Every LLP shall use the words “limited Liability partnership” or “LLP” as the last words
of its name.

9. Financial disclosure: Every LLP is under an obligation to maintain annual account reflecting true and fair
view of its state of affairs. A statement of accounts and solvency must be filed with the registrar every year.

10. Capital contribution: In case of LLP, there is no concept of any share capital, but every partner is required
to contribute towards the LLP as specified in the LLP agreement.

LLP agreement:

• It means any written agreement the partners of the limited liability partnership or between the LLP and
its partners which determines the mutual rights and duties of the partners and their rights and duties in
relation to that limited liability partnership.
• The agreement contains name of LLP, name of partners and designated partners, form of contribution,
profit sharing ratio and rights and duties of partners.
Incorporation by Registration:

• In order to incorporate an LLP, two or more persons associated for carrying on a lawful business with a
view to profit shall subscribe their names to an incorporation document.
• It shall be filed with the prescribed fees, and in the manner prescribed by the Registrar of the state where
the registered office of the LLP is situated.
• A statement in the prescribed form should also be filed along with the incorporation document, which
states that all the requirements of the Act and Rules have been complied with in the case of
incorporation.
• The statement should be made by either an advocate or a company secretary or a chartered accountant
or a cost accountant, who is engaged in the formation of the LLP and by anyone who subscribed his name
in the incorporation document.
• The incorporation document contains the following matters:
a) the name of the limited liability partnership
b) the nature of the proposed business
c) the address of the registered office
d) the name and address of the partners
e) the name and address of the designated partners
• When all the formalities are complied with the Registrar will register the LLP in the name specified
there in. Every LLP shall have either the words "limited liability partnership” or "LLP” as the last
words of its name.

Distinction between LLP and Partnership:

LLP PARTNERSHIP
• Formed as per LLP act 2008. • Formed as per the partnership act 1932.
• Registration is compulsory with the registrar of • Registration is not compulsory.
companies.
• It has a separate legal entity. • No separate legal entity.
• It has a perpetual succession. • It comes to an end at the death, retirement or
insolvency of the partners.
• Minimum number of partners is two and there is • Two to twenty partners.
no maximum limit.
• Name the end word limited liability partnership • No rules for the name.
or LLP.
• Liability limited to the extent of the contribution • Unlimited liability and personal property of the
to the LLP. partners are liable for the debts of the firm.
• Foreign nationals can be partners. • Foreign nationals cannot form partnership firm.
• Annual statement of accounts and annual • No necessity of filing returns to the registrar of
returns has to be filed with the ROC. firms.

Distinction between LLP and Company

COMPANY LLP
• Formed as per the companies act 2013 • Formed by the LLP act 2008
• Registration is compulsory. • Registration is compulsory.
• It has a separate legal entity. • It has a separate legal entity.
• It has a perpetual succession. • It also has a perpetual succession.
• Minimum number of members is two in the case of • Minimum two partners.
a private company and seven in the case of a public
limited company.

• Maximum number of members 200 in the case of a • No limit to the maximum number of partners.
private company and there is no maximum limit for
a public company.

• Public company uses the word Ltd at its end name • Use either the word limited liability
and private company use the word Pvt Ltd at its partnership or LLP at its end name.
end name.
• Minimum number of directors is two in the case of • Minimum two designated partners required.
a private company and three in the case of a public
company.
• Liability limited to the extent of the value of shares. • Liability limited to the extent of the
contribution to the LLP.

Winding up and dissolution:

The winding up of an LLP may be either voluntary or by the tribunal and LLP, so wound up may be dissolved.

1. Voluntary winding up: Any LLP may be wound up voluntarily if the LLP passes a resolution to wind
up the LLP with approval of at least three fourth of the total number of its partners, but if the LLP
has creditors, whether secured or unsecured, the approval of such creditors are also be required for
its winding up.

2. Winding up by the tribunal: The tribunal may wound up the LLP in the following circumstances;
a) If the LLP decides that the LLP be wound up by the tribunal
b) If for a period of more than six months, the number of partners of the LLP is reduced
below two
c) If the LLP is unable to pay its debts
d) If the LLP has made a default in filing with the registrar the statement of account or
annual return for any five consecutive financial year
e) If the tribunal is of the opinion that, it is just and equitable that the LLP be wound up

Advantages of LLP:

1. Easy formation
2. Separate legal entity
3. Limited liability
4. Perpetual succession
5. Combined benefit of partnership and company
6. Easy transferability of ownership
7. Lower rate of taxation