As per the Limited Liability Partnership Act, 2008
Introduction
A Limited Liability Partnership (LLP) is a corporate business form that combines the flexibility of a traditional partnership with the advantages of limited liability for its partners. It is a separate legal entity, capable of entering into contracts and holding property in its own name.
Key Features
| Feature | Description |
|---|---|
| Legal Status | Separate legal entity distinct from its partners |
| Perpetual Succession | Continues to exist despite changes in partners |
| Limited Liability | Partners are liable only to the extent of their agreed contribution |
| Minimum Partners | Minimum 2 partners; no upper limit |
| Body Corporate | Recognised as a body corporate under law |
| Agreement-Based | Governed by an LLP Agreement between the partners |
| Registration | Mandatory registration with the Registrar of Companies (RoC) |
Governing Law
- Limited Liability Partnership Act, 2008
- Rules framed thereunder
- Companies Act, 2013 may apply in certain aspects
Designated Partners
- At least 2 designated partners are required (1 must be a resident of India).
- They are responsible for regulatory compliance, such as filing returns and maintaining records.
Incorporation Procedure
- Obtain Digital Signature Certificate (DSC) for proposed partners.
- Reserve Name using the RUN-LLP facility.
- File FiLLiP Form (Form for Incorporation of LLP) with required documents.
- Submit LLP Agreement within 30 days of incorporation.
LLP Agreement
This agreement governs:
- Rights and duties of partners
- Profit-sharing ratio
- Capital contribution
- Admission or retirement of partners
- Dispute resolution mechanism
If no agreement is filed, First Schedule of the Act applies by default.
Advantages of LLP
- Limited liability protection to partners
- Separate legal identity
- Flexibility in internal management
- Less compliance as compared to a company
- No minimum capital requirement
- Suitable for professionals and small businesses
Disadvantages
- Cannot raise equity funding from the public
- Not suitable for businesses intending to scale quickly
- Less credibility compared to private limited companies
Differences: LLP vs Partnership vs Company
| Basis | LLP | Partnership Firm | Private Company |
|---|---|---|---|
| Legal Status | Separate legal entity | No separate legal entity | Separate legal entity |
| Liability | Limited | Unlimited | Limited |
| Registration | Mandatory | Optional | Mandatory |
| Compliance | Moderate | Low | High |
| Ownership | Partners | Partners | Shareholders |
| Perpetual Succession | Yes | No | Yes |
Key Compliance for LLPs
- Filing of Annual Return (Form 11)
- Filing of Statement of Accounts (Form 8)
- Income Tax Return filing
- Audit if turnover > ₹40 lakhs or contribution > ₹25 lakhs