The Limited Liability Partnership
Limited Liability Partnership- Meaning and Concept
After going through this lesson, you shall be able to understand the following concepts related to Limited Liability Partnership.
- Meaning of Limited Liability Partnership (LLP)
- Characteristics of Limited Liability Partnership(LLP)
- Advantages and disadvantages of Limited Liability Partnership (LLP)
- Need of Limited Liability Partnership(LLP)
- Process of incorporation of a LLP
- Comparison of LLP with LLC and Partnership
After going through the detailed concepts of Partnership and Company in your previous studies, you must have understood the basic difference between a Partnership and a Company. The limited liability feature and the feel of a body corporate of a company somewhere is seen as an added advantage over the partnership form of business. On the other hand, we require a minimum amount to start a company but no such requirement is needed to start a partnership business. Hence, as a midway between a partnership and a limited liability company, comes another form of partnership which is called Limited Liability Partnership. This form of business comes with a limited liability feature and no minimum capital requirement.
The concept of Limited Liability Partnership was introduced by the central government of India in the year 2008 in the Parliament of India. The concept of LLP in the form of a Bill was passed on 12th December’ 2008 in the both houses of Parliament. The honourable President of India signed this Bill on 7th January’ 2009. This bill became an Act with 81 sections and 4 schedules on 7th January’ 2009. This Act was enforced in India w.e.f.31st March’ 2009. Different schedules of this Act have been discussed briefly as under:
Schedule 1: Mutual Rights and Duties of Partners
Provisions of LLP in the absence of formal agreement in this respect
Schedule 2: Process of conversion of a Partnership Firm into LLP
Schedule 3: Process of conversion of a Private Company into LLP
Schedule 4: Process of conversion of an Unlisted Company into LLP
Q.1 When was LLP passed in both the houses of Parliament?
a) 7th January’ 2009; b) 12th December’ 2008; c) 12th November’ 2008; d) 12th December’ 2009
Q.2 How many sections are there in LLP Act’ 2008?
a) 91; b) 84; c) 81; d) 78
Q.3 Which schedule describes the mutual rights and duties of the partners?
a) Schedule 1 b) Schedule 2; c) Schedule 3; d) Schedule 4
Q. 4 When was LLP Act’2008 enforced in India?
a) 1st March’ 2008; b) 1st April’ 2008; c) 31st March’ 2009; d) 7th January’ 2009.
According to Section 3 of The Limited Liability Partnership Act’ 2008,"A Limited Liability Partnership is a body corporate incorporated (formed and registered) under this act with a separate legal entity from its members, having a perpetual succession ,rights and liabilities which does not get affected due to any change in the status of its partners."
In other words, LLP is a new form of Partnership which brings it close to a Company. The partners enjoy limited liability feature of a company, unlike the ordinary Partnership where every partner has unlimited liability. A LLP can be created only by a legal process as provided under The Limited Liability Partnership Act’ 2008. The Registrar of Companies (ROC) shall register and control the affairs of LLPs. Indian Partnership Act, 1932 shall not be applicable to LLPs and no limit for the maximum number of partners has been prescribed in the Act for a LLP unlike an ordinary partnership which has a cap of maximum 20 partners meant for ordinary business and 10 in case of a partnership meant for Banking Business according to Companies Act’1956. This limit was increased to 100 in Companies Act’2013 and further reduced to 50 by Rule 10 of Companies Rules, 2014. One of the designated members should be a resident of India whether an individual or a body corporate including a foreign LLP having places of business in India.
Characteristics of LLP
Based on the above discussion following are the charac…
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