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Limited Liability Partnership (LLP) is a new form of partnership in India, introduced in the year 2008 and regulated by The Limited Liability Partnership Act 2008.
As the name suggest liability of the partners are limited to the extent of their share. The main object is that one partner should not be liable for the act or negligence of other partner. It combines the features of partnership and a company.
People generally got confused with the selection whether to go for Company or Partnership or LLP. LLP is for those who want to run business as a separate entity and with limited liability, with less compliance and.
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Limited Liability: Not like as partnerships, Liability of Partners are limited to the extent of their capital contribution only, hence no impact on partners personal assets.
Separate Legal Entity: As a Company, LLP do enjoys separate legal entity. The Limited Liability Partnership Act 2008, defines LLP as a separate legal entity then its partners.
Less Compliance: Compliance under LLP is less in compare to Companies; even the audits are also not required for every LLP.
| PARTICULARS | LIMITED LIABILITY PARTNERSHIP | PARTNERSHIP |
|---|---|---|
| GOVERNED BY: | Limited Liability Act, 2008 | The Partnership Act, 1932 |
| TIME For Incorporation | 7-10 days in complete process | 5-7 days |
| LIABILITY | Limited, to the extent their contribution towards LLP, except in case of intentional fraud or wrongful act of omission or commission by the partner. | Unlimited. Partners are severally and jointly liable for actions of other partners and the firm and liability extend to their personal assets. |
| TAX LIABILITY | 30%+ health and education cess | 30%+ Health and education cess |
| PRINCIPAL/AGENT RELATIONSHIP | Partners act as agents of LLP and not of the other partners. | Partners are agents of the firm and other partners. |
| DIRECTOR IDENTIFICATION NO./ DESIGNATED PARTNER IDENTIFICATION NO. | Each Designated Partners is required to have a DPIN before being appointed as Designated Partner of LLP. | The partners are not required to obtain any identification number |
| DIGITAL SIGNATURE | As forms are filled electronically, therefore one Designated Partner should have Digital Signatures. | There is no requirement of obtaining Digital Signature |
| ANNUAL FILING | Annual Statement of accounts and Solvency & Annual Return is required to be filed with Registrar of Companies every year. | No return is required to be filed with Registrar of Firms |
| AUDIT OF ACCOUNTS | All LLP except for those having turnover less than Rs.40 Lacs or Rs.25 Lacs contribution in any financial year are required to get their accounts audited annually as per the provisions of LLP Act 2008. | Partnership firms are only required to have tax audit of their accounts as per the provisions of the Income Tax Act |
| CREDIT WORTHINESS OF ORGANIZATION | Will enjoy Comparatively higher creditworthiness from Partnership due to Stringent regulatory framework but lesser than a company. | Creditworthiness of firm depends upon goodwill and creditworthiness of its partners |
| NUMBER OF MEMBERS | Minimum 2 partners and there is no limitation of maximum number of partners. | Minimum 2 and Maximum 20 |
| REGISTRATION | Registration with Registrar of LLP required. | Registration is optional |
LLP shall be a body corporate and a legal entity separate from its partners. It will have perpetual succession.
The LLP structure is available in countries like United Kingdom, United States of America, various Gulf countries, Australia and Singapore. On the advice of experts who have studied LLP legislations in various countries, the LLP Act is broadly based on UK LLP Act 2000 and Singapore LLP Act 2005. Both these Acts allow creation of LLPs in a body corporate form i.e. as a separate legal entity, separate from its partners/members.
No. The essential requirement for setting LLP is ‘carrying on a lawful business with a view to profit’.
Every partner of an LLP would be, for the purpose of the business of the LLP, an agent of the LLP but not of the other partners. Liability of partners shall be limited except in case of unauthorized acts, fraud and negligence. But a partner shall not be personally liable for the wrongful acts or omission of any other partner. An obligation of the limited liability partnership whether arising in contract or otherwise, is solely the obligation of the limited liability partnership. The liabilities of LLP shall be met out of the property of the LLP.
An LLP shall be under obligation to maintain annual accounts reflecting true and fair view of its state of affairs. A “Statement of Accounts and Solvency” in prescribed form shall be filed by every LLP with the Registrar every year.
Every LLP would be required to file with ROC, every year, an Annual Return, contents of which would be prescribed under rules.
Registrar would have power to obtain such information which he may consider necessary for the purposes of carrying out the provisions of the Act, from any designated partner, partner or employee of the LLP. He would also have power to summon any designated partner, partner or employee of any LLP before him for any such purpose, in case the information has not been furnished to him or in case the Registrar is not satisfied with the information furnished to him.
Yes. The LLP Act contains enabling provisions pursuant to which a firm (set up under Indian Partnership Act, 1932) and private company or unlisted public company (incorporated under Companies Act) would be able to convert themselves into LLPs. Provisions of clause 58 and Schedule II to Schedule IV to the Act provide procedure in this regard.
Yes as per latest amendments of companies act 2013. And LLP can now get converted into company but after following certain procedure and with certain limitations and boundations.
Provisions of clauses 60 to 62 of the Act provide for the manner in which compromises or arrangements including mergers and amalgamations involving LLPs shall be allowed.
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