Limited liability partnership is also called hybrid form of organisation. It is a new form of organisation that combines the flexibility of a partnership and the advantages of limited liability of a company at a low compliance cost, on the basis of a mutually arrived agreement, like in case of a partnership firm.
The Parliament enacted the Limited Liability Partnership Act, 2008 that received the assent of the President on 7th January, 2009.
Salient features of the LLP :
LLP gives the benefits of limited liability of a company and the flexibility of a partnership.
The LLP can continue its existence irrespective of changes in partners.
3.Separate Legal Entity:
The LLP is a separate legal entity and is capable of entering into contracts and holding property in its own name.
LLP is liable to the full extent of its assets but liability of the partners is limited to their agreed contribution in the LLP.
5.Protection from joint liability:
No partner is liable on account of the independent or un-authorized actions of other partners, thus individual partners are protected from joint liability created by another partner’s wrongful business decisions or misconduct.
Mutual rights and duties of the partners within a LLP are governed by an agreement between the partners or between the partners and the LLP as the case may be.
Advantages of Limited Liability Partnership
- The cost of setting up and running LLP is low.
- There are very less legal formalities.
- There is no restriction on upper limit of members.
- There is no minimum capital requirement.
- It is easy process to join and leave LLP.
- No partner can claim the business property in case of dispute.
- A body corporate can also become a partner of LLP.
- LLP can easily be dissolved.
Disadvantage of Limited Liability Partnership
The only disadvantage of LLP form is that it cannot invite public to raise finance, It means no possibility of IPO by LLP.
Difference Between LLP and Partnership Firm
LLP: It is governed by The Limited Liability Partnership Act, 2008 .
Partnership firm: It is governed by The Indian Partnership Act.
LLP: Registration is Compulsory.
Partnership firm: Registration is Optional.
Separate Legal Entity:
LLP: It enjoys separate legal entity.
Partnership firm: It is not separate legal entity from partners.
LLP: It has perpetual succession.
Partnership firm: It does not have perpetual succession.
LLP: LLP may have its own common seal.
Partnership firm: Common seal is not required.
LLP: LLP can also sue and be sued.
Partnership firm: Only registered partnership can sue.
Transferability of interest:
LLP: Interest of partners are transferable as per the provisions of LLP agreement.
Partnership firm: Transferability of Interest subject to the mutual consent of all the members.
Difference between LLP & Company
Company: Company is regulated by Companies Act, 2013 .
LLP: LLP is governed by a contractual agreement between partners.
Separation of ownership and management:
Company: There is separation of ownership and management in case of company.
LLP: In case of LLP members owning capital and managing affairs are same.
LLP will have more flexibility as compared to a company.
LLP will have lesser compliance requirements as compared to a company.