Limited Liability Partnership (LLP)
1. INTRODUCTION
The Limited Liability Partnership Act, 2008 came into effect in 2010
to introduce a new form of business organization in India.
Why was LLP introduced?
Because traditional business forms had limitations:
1) Partnership firms
Partners have unlimited liability.
Firm has no separate legal entity.
Not suitable for large or risky ventures.
Not attractive for professionals wanting external investment.
2) Private Companies
Too much compliance burden.
High cost of formation.
Rigid legal structure.
Not flexible for professional services.
The LLP offers the best of both worlds:
Flexibility like a partnership.
Legal protection like a company.
2. MEANING OF LIMITED LIABILITY PARTNERSHIP
An LLP is:
A body corporate
Created by registration under the LLP Act.
A separate legal entity
It can:
Own property
Take loans
Ener contracts
Sue others
Be sued
All in its own name (NOT in partner’s names).
Partners NOT equal to LLP
Partners are agents of the LLP, not of each other.
Perpetual Succession
Does not dissolve if a partner:
Dies
Retires
Becomes insolvent
Leaves the firm
Limited Liability
Each partner is liable only up to the amount of capital they
contributed or agreed to contribute.
Simple Example:
, A, B and C start an engineering firm as LLP.
A makes a mistake in design causing loss of Rs20 Lakhs.
In a partnership:
All partners are personally liable.
In an LLP:
Only LLP + A are liable.
B and C’s personal assets are safe.
3. ADMINISTRATION & AMENDMENTS IN THE ACT
The Act is administered by:
Ministry of Corporate Affairs (MCA)
Makes rules
Issues notifications
Frames amendments acts
Registrar of Companies (ROC)
Registers LLP’s
Issues Certificate of Incorporation
Maintains records
Examines fillings
IMPORTANT AMENDMENTS
LLP (Amendments) Act, 2021
Introduced major changes such as:
1) Small LLP
Reduced penalties, easier compliance for small businesses.
2) De-criminalization
Many offences (like delay in filing) converted form criminal
penalties monetary penalties.
3) Introduction of LLP Settlement Schemes
Allowing late filing with lesser penalty.
4) Online & Simplified Filing
Incorporation & annual fillings through MCA portal.
4. FEATURES OF LLP
This is the most important exam topic.
1) Separate Legal Entity
LLP exists independently of its partners.
Practical Meaning:
Can open bank account
Can purchase property
Can enter contracts
Can sue & be sued
Example:-- “ABC LLP” Buys a car. Partners cannot claim it personally
even if they contributed money.
2) Limited Liability
Partners are not personally liable for business debts.
1. INTRODUCTION
The Limited Liability Partnership Act, 2008 came into effect in 2010
to introduce a new form of business organization in India.
Why was LLP introduced?
Because traditional business forms had limitations:
1) Partnership firms
Partners have unlimited liability.
Firm has no separate legal entity.
Not suitable for large or risky ventures.
Not attractive for professionals wanting external investment.
2) Private Companies
Too much compliance burden.
High cost of formation.
Rigid legal structure.
Not flexible for professional services.
The LLP offers the best of both worlds:
Flexibility like a partnership.
Legal protection like a company.
2. MEANING OF LIMITED LIABILITY PARTNERSHIP
An LLP is:
A body corporate
Created by registration under the LLP Act.
A separate legal entity
It can:
Own property
Take loans
Ener contracts
Sue others
Be sued
All in its own name (NOT in partner’s names).
Partners NOT equal to LLP
Partners are agents of the LLP, not of each other.
Perpetual Succession
Does not dissolve if a partner:
Dies
Retires
Becomes insolvent
Leaves the firm
Limited Liability
Each partner is liable only up to the amount of capital they
contributed or agreed to contribute.
Simple Example:
, A, B and C start an engineering firm as LLP.
A makes a mistake in design causing loss of Rs20 Lakhs.
In a partnership:
All partners are personally liable.
In an LLP:
Only LLP + A are liable.
B and C’s personal assets are safe.
3. ADMINISTRATION & AMENDMENTS IN THE ACT
The Act is administered by:
Ministry of Corporate Affairs (MCA)
Makes rules
Issues notifications
Frames amendments acts
Registrar of Companies (ROC)
Registers LLP’s
Issues Certificate of Incorporation
Maintains records
Examines fillings
IMPORTANT AMENDMENTS
LLP (Amendments) Act, 2021
Introduced major changes such as:
1) Small LLP
Reduced penalties, easier compliance for small businesses.
2) De-criminalization
Many offences (like delay in filing) converted form criminal
penalties monetary penalties.
3) Introduction of LLP Settlement Schemes
Allowing late filing with lesser penalty.
4) Online & Simplified Filing
Incorporation & annual fillings through MCA portal.
4. FEATURES OF LLP
This is the most important exam topic.
1) Separate Legal Entity
LLP exists independently of its partners.
Practical Meaning:
Can open bank account
Can purchase property
Can enter contracts
Can sue & be sued
Example:-- “ABC LLP” Buys a car. Partners cannot claim it personally
even if they contributed money.
2) Limited Liability
Partners are not personally liable for business debts.
