Limited liability Partnership (LLP) is a corporate business structure that enables Managerial skills and entrepreneurial capability to join and operate in a workable, innovative and systematic manner, providing benefits of limited liability while permitting its partners the flexibility of organizing their internal structure as a partnership.
A Limited Liability Partnership (LLP) is a separate legal entity where the liability of partners is limited to their agreed contribution. It is governed by the LLP Act, 2008 in India and similar regulations in other countries. Limited Liability Partnership (LLP) is a formal legal process that combines the benefits of a partnership and a private limited company. An LLP offers flexibility in management and operations, while also providing limited liability protection to its partners.
As per sec 2(n) of the Limited liability Partnership (LLP) Act, 2008, Limited Liability Partnership (LLP) means a partnership formed and registered under this act.
1. Separate Legal Entity
An LLP is a body corporate and a legal entity separate from its partners.
• It can own assets, incur liabilities, enter into contracts, and sue or be sued in its own name.
• This provides legal continuity and makes the LLP more credible.
2. Limited Liability of Partners
The liability of each partner in an LLP is limited to the extent of their capital contribution.
• Partners are not personally liable for the debts and obligations of the LLP.
• Exceptions apply in cases of fraud or negligence.
3. Perpetual Succession
An LLP enjoys perpetual succession, meaning:
• The existence of the LLP is not affected by the death, insolvency, or retirement of any partner.
• The LLP continues to operate until it is legally dissolved.
4. Minimum Two Partners Required
• An LLP must have a minimum of two partners to be registered.
• There is no upper limit on the number of partners.
• At least one Designated Partner must be a resident of India.
5. Designated Partners and their Responsibilities
• LLPs require at least two Designated Partners, who are responsible for legal and regulatory compliance under the Act.
• Designated Partners must obtain a Designated Partner Identification Number (DPIN) and Digital Signature Certificate (DSC).
6. No Requirement of Minimum Capital Contribution
• There is no minimum capital requirement to start an LLP.
• Contribution can be in the form of tangible, intangible assets, or services rendered.
7. Flexible Management Structure
• Partners can decide the rights, duties, and profit-sharing ratio via an LLP Agreement.
• No need to follow the rigid governance structure required for companies (e.g., board meetings, shareholder meetings).
8. Taxation Benefits
• LLPs are taxed as a partnership firm under the Income Tax Act, 1961.
• No dividend distribution tax (DDT) is payable.
• No surcharge on income tax for LLPs unlike companies.
• Partners’ remuneration and interest on capital are allowed as deductions (subject to limits under Section 40(b)).
9. Easy Conversion and Winding Up
• Conversion to LLP: Partnerships and private companies can be converted into LLPs.
• Winding Up: LLPs can be dissolved voluntarily or by Tribunal order under the Insolvency and Bankruptcy Code, 2016 or the LLP (Winding up and Dissolution) Rules, 2012.
10. Profit Sharing Flexibility
• Profit and loss sharing ratios need not be proportional to capital contribution.
• This is governed by mutual agreement among partners, which gives operational freedom.
11. Statutory Recognition
• LLPs are recognized under the law and can:
• Open bank accounts
Tags : LLP Registration
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