Applicability of respective Act

WHAT IS LLP?

Limited Liability Partnership (LLP) entities, the world wide recognised form of business organisation has been introduced in India by way of Limited Liability Partnership Act, 2008 by way of notification dated 31st March 2009. 

• A Limited Liability Partnership, popularly known as LLP combines the advantages of both the Company and Partnership into a single form of organisation. 
• In an LLP one partner is not responsible or liable for another partner's misconduct or negligence, this is an important difference from that of a unlimited partnership. 
• In an LLP, all partners have a form of limited liability for each individuals' protection within the partnership, similar to that of the shareholders of a corporation. However, unlike corporate shareholders, the partners have the right to manage the business directly.
• An LLP also limits the personal liability of a partner for the errors, omissions, incompetence, or negligence of the LLP's employees or other agents.

Limited Liability Partnership is managed as per the LLP Agreement, however in the absence of such agreement the LLP would be governed by the framework provided in Schedule 1 of Limited Liability Partnership Act, 2008 which describes the matters relating to mutual rights and duties of partners of the LLP and of the limited liability partnership and its partners.

Benefits of  LLP:- 

• Renowned form of business: Though the concept of Limited Liability Partnership has been recently introduced in India but it is very known concept in other countries of the world especially in service sector.
• Body Corporate: Just like a Company, LLP is also body corporate , which means it has its own existence as compared to partnership. LLP and its Partners are distinct entity in the eyes of law. LLP will know by its own name and not the name of its  partners.
• Liability: A LLP exists as a separate legal entity from your personal life. Both LLP and person, who own it, are separate entities and both functions separately. Liability for repayment of debts and lawsuits incurred by the LLP lies on it and not the owner. Any business with potential for lawsuits should consider incorporation; it will offer an added layer of protection.
• Perpetual Succession: An incorporated LLP has perpetual succession. Notwithstanding any changes in the partners of the LLP, the LLP will be a same entity with the same privileges, immunities, estates and possessions. The LLP shall continue to exist till its wound up in accordance with the provisions of the relevant law.
• Flexible to Manage: LLP Act 2008 gives LLP the at most freedom to manage its own affairs. Partner can decide the way they want to run and manage the LLP, in form of LLP Agreement. The LLP Act does not regulated the LLP to large extent rather than allows partners the liberty to manage it as per their will and fancies..
• Easy Transferable Ownership: It is easy to become a Partner or leave the LLP or otherwise it is easier to transfer the ownership in accordance with the terms of the LLP Agreement.
• Separate Property: A LLP as legal entity is capable of owning its funds and other properties. The LLP is the real person in which all the property is vested and by which it is controlled, managed and disposed off. The property of LLP is not the property of its partners. Therefore partners cannot make any claim on the property in case of any dispute among themselves.
• Taxation: Another main benefit of incorporation is the taxation of a LLP. LLP are taxed at a lower rate as compared to Company. Moreover, LLP are also not subject to Dividend Distribution Tax as compared to company, so there will not be any tax while you distribute profit to your partners.
• Raising Money: Financing a small business like sole proprietorship or partnership can be difficult at times. A LLP being a regulated entity like company can attract finance from PE Investors, financial institutions etc.
• Capacity to sue: As a juristic legal person, a LLP can sue in its name and be sued by others. The partners are not liable to be sued for dues against the LLP.
• No Mandatory Audit Requirement: Under LLP, only in case of business, where the annual turnover/contribution exceeds Rs 40 Lacs/Rs 25 Lacs are required to get their account audited annually by a chartered accountant. This provides great relief to small businessmen.
• Partners are not agent of other Partners: In LLP, Partners unlike partnership are not agents of the partners and therefore they are not liable for the individual act of other partners in LLP, which protects the interest of individual partners.
• Compliance: As compared to a private company, the number of compliance are on lesser side in case of LLP.