The full form of LLP is Limited Liability Partnership. A traditional partnership and a business are combined to form an LLP. Some features of a typical partnership and a business are also present. For instance, for a modest compliance cost, it provides the adaptability of a traditional partnership firm and the benefit of a company’s restricted liability. It denotes that in an LLP, participants are free to coordinate their internal strategies to carry out a mutually agreed-upon agreement, such as a partnership business, and that even partners have limited liability, where each partner’s liability is constrained.
- Besides that, in an LLP, one party is not liable or charged for another party’s neglect, wrongdoing or misconduct.
- It’s a hybrid between a partnership & an organisation. In comparison, an LLP must have at least one “General Partner” with unlimited liability in individual nations.
- In businesses where liability is limitless, the partners’ private properties can be sold off to pay for the damages or to cover the dues.
- The Government has adopted Act LLP 2008, which entered into force on 1 April 2009, to resolve this restriction.
- LLP is also a legal entity since it has to be licenced with the ROC (Registrars of Companies) and is regulated by the 2008 LLP Act.
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Advantages of LLP
- Partners are different from the company, or the firm is different from its partners. If a company generates many casualties, nobody can assert their property rights. Only their investment in the businesses will change.
- Liabilities are constrained and continue to be based on the partners’ capital and equity. In addition, the agents of the Limited Liability Partnership, not the partners, must be all partners.
- It gives you the flexibility to make the necessary adjustments. On the basis of a mutual agreement, it provides members the flexibility to freely coordinate their internal operations, as is the case in a collaboration firm.
- simple to set up The LLP agreement must be signed by the partners in person at the ROC branch (Registrar of Companies).
- The corporation also has eternal succession, which guarantees that it won’t collapse if one of the partners dies or declares bankruptcy.
- The minimum number of partners is two, and at least one of them must be an Indian citizen. However, there is no restriction on the number of partners, and overseas partners are also allowed.
- An LLP could not be established for charitable or nonprofit objectives.