| Professionals/small entrepreneurs can incorporate a | | | | 7) The mutual rights and duties of partners of an LLP |
| ‘Limited Liability Partnership’ (LLP) firm to | | | | inter se and those of the LLP and its partners shall |
| avail the facilities of limited company and limited | | | | be governed by an agreement between partners or |
| liability status. It can be a boon to the small | | | | between the LLP and the partners subject to the |
| entrepreneurs and professionals. As far as India is | | | | provisions of the LLP Act 2008. The act provides |
| concerned, this Limited Liability Partnership (LLP) is a | | | | flexibility to devise the agreement as per their |
| new corporate form that enables professional | | | | choice. In the absence of any such agreement, the |
| knowledge and entrepreneurial skill to combine, | | | | mutual rights and duties shall be governed by the |
| organize and operate in an innovative and proficient | | | | provisions of proposed the LLP Act; |
| manner. It provides an alternative to the traditional | | | | 8) The LLP shall be under an obligation to maintain |
| partnership firm with unlimited liability. By incorporating | | | | annual accounts reflecting true and fair view of its |
| a LLP, its member can avail the benefit of limited | | | | affairs. A statement of accounts and solvency shall |
| liability and the flexibility of organizing their internal | | | | be filed by every LLP with the Registrar of |
| management on the basis of a mutually-arrived | | | | Companies (ROC) every year; |
| agreement, as is the case in a partnership firm. | | | | 9) The Indian Partnership Act, 1932 is not being |
| This format would be quite useful for small and | | | | applicable to LLP. |
| medium enterprises in general and for the enterprises | | | | 10) No partner would be liable on account of the |
| in services sector in particular, including professionals | | | | independent or unauthorized actions of other |
| and knowledge based enterprises. | | | | partners, thus allowing individual partners to be |
| A revised LLP Bill was introduced in the Rajya Sabha | | | | shielded from joint liability created by another |
| on 21st Oct. 2008. The Bill was passed in the Rajya | | | | partner’s wrongful business decisions or |
| Sabha on 12th December, 2008. The Bill received | | | | misconduct. |
| assent of Hon’ble President on 7th January, | | | | A LLP is advantageous because of it’s |
| 2009. | | | | comparatively lower cost of formation and running, |
| The LLP Rules 2009 covering the registration and | | | | lesser compliance requirements, easy to manage and |
| other operational aspects of the Act have been | | | | run and also easy to wind-up and dissolve, no |
| notified in the official gazette on Ist April 2009 | | | | requirement of minimum capital contributions, partners |
| The silent features of Limited Liability Partnership Act | | | | are not liable for the acts of the other partners and |
| 2008 are as under: | | | | importantly no minimum alternate tax (as of date). |
| 1) LLP is governed by the Limited Liability Partnership | | | | But, LLP cannot raise money from the public. |
| Act 2008, which has come into force with effect | | | | LLP should maintain annual accounts. However, audit |
| from April 1, 2009. | | | | of the accounts is required only if the contribution |
| 2) A LLP is a body corporate and a legal entity | | | | exceeds Rs. 25 lakhs or annual turnover exceeds |
| separate from its partners having perpetual | | | | Rs.40 lakhs. |
| succession. While the LLP is a separate legal entity, | | | | Liability of the partners is limited to the extent of his |
| liable to the full extent of its assets, the liability of | | | | contribution in the LLP. No exposure of personal |
| the partners would be limited to their agreed | | | | assets of the partner, except in cases of fraud. |
| contribution in the LLP; | | | | The Registrar of Companies (ROC) is the authority |
| 3) LLP combines the advantages of running a | | | | having jurisdiction over the incorporation. The steps |
| Partnership firm, and separate legal entity status | | | | required to incorporate a LLP are as follows:: |
| & limited liability aspect of a Company; | | | | 1. Decide the Partners and the Designated Partners; |
| 4) A LLP is a separate legal entity and separate from | | | | 2. Obtain Designated Partner Identification Number |
| its partners. It can own it’s assets, sue and be | | | | (DPIN) and a digital signature certificate; |
| sued; | | | | 3. Decide on the name of the LLP and check it’s |
| 5) The members of LLP have the right to manage | | | | availability with the ROC; |
| their business directly, which facility is not available to | | | | 4. Draft the LLP agreement; |
| corporate shareholders; | | | | 5. File the LLP Agreement, incorporation documents |
| 6) To constitute an LLP minimum of 2 partners is | | | | and obtain the Certificate of Incorporation; |
| required. The Act has not prescribed ant maximum | | | | Note:1) Here, LLP means ‘Limited Liability |
| no. of members; | | | | Partnership’ firm. |