Limited Liability Partnership basically used
in partnership. As name suggest that limited liability means in partnership all
the liability should limited. It is a kind of mix business entity or we can say
that a hybrid business entity. It is related to corporation, partnership or
proprietorship.
So
Limited Liability partnership is hybrid business entity having certain
characteristics of both a corporation and a partnership or sole proprietorship.
According
to LLP in limited liability partnership the liability of a each partnership
partner are limited and flexible.
Concept of LLP -
The LLP concept is based on two separate
entity concepts, a partnership and limited liability. Before the LLP became
available as an entity choice for business owners, the concept of a partnership
and limited liability were mutually exclusive. The LLP entity is often the
ideal choice for business offering specific types of professional services.
Characteristics of LLP –
There are many characteristics of LLP but here
I can explain few which are important.
i.
In LLP minimum
number of partners is 2 and there is no maximum.
ii.
Perpetual succession
is an important feature of LLP.
iii.
LLP shall be a
corporate body and a legal entity separate from its partners
iv.
Every LLP should
have two "Designated partners" at least one of whom should be a
resident Indian satisfying the conditions stipulated by the central government.
v.
No exposure of
personal assets of the partner, except in cases of fraud.
vi.
An intending unlimited liability
partnership firm seeking to convert itself into a LLP is required to apply to
the Registrar as perform 17 which should be accompanied by written consent from
all creditors.
vii.
LLP shall
maintain annual accounts.
viii.
LLP can also take actions like mergers
amalgamations. So there are provisions for winding up and dissolution.
ix.
The LLP allow its
members the flexibility of organizing their internal structure as a partnership
based on an agreement.
Advantages –
LLP has many advantage in
business. Some of advantages are -
1. There is no requirement of minimum capital
contribution.
2. There is no restriction as to maximum number
of partners in LLP.
3. The LPP is easy to establish.
4. The LLP is a separate legal entity.
5. In LLP less Cost is required for formation as
Compared to a company.
6. LLP is easy to dissolve or wind-up.
7. LLP & its partners are distinct from each
other
8. Partners are not liable for Act of other
partners.
Disadvantages –
In LLP under some cases, liability may extend
to personal assets of partners
LLP cannot raise funds from Public
In LLP there is no separation of Management
from owners.
Difference
between Partnership and LLP –
|
Basis
Registration
Legal entity
Liability
No. of partners.
Capital contribution
|
Partnership
Not compulsory.
Not a separate legal entity.
Unlimited, can extend to the
personal assets of the partners.
2- 20 partners
The contribution in capital is
required in partnership.
|
LLP
Compulsory registration required
with the ROC.
Is a separate legal entity.
Limited to the extent of the
contribution to the LLP.
Minimum of 2. No maximum
No requirement of minimum capital
contribution.
|
