Posted on by Insights Editor
Print Friendly, PDF & Email

Limited Liability Partnership (LLP) Act

Topics Covered: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.

Limited Liability Partnership (LLP) Act:

Context:

The Corporate Affairs Ministry is planning to decriminalise 12 offences as well as omit a provision entailing criminal liability under the Limited Liability Partnership (LLP) Act, 2008, for greater ease of doing business for law-abiding LLPs.

What is a LLP?

A Limited Liability Partnership (LLP) is a partnership in which some or all partners have limited liability. It therefore exhibits elements of partnerships and corporations.

  • In an LLP, one partner is not responsible or liable for another partner’s misconduct or negligence.

Salient features of an LLP:

  • An LLP is a body corporate and legal entity separate from its partners. It has perpetual succession.
  • Being the separate legislation (i.e. LLP Act, 2008), the provisions of Indian Partnership Act, 1932 are not applicable to an LLP and it is regulated by the contractual agreement between the partners.
  • Every Limited Liability Partnership shall use the words “Limited Liability Partnership” or its acronym “LLP” as the last words of its name.

Composition:

Every LLP shall have at least two designated partners being individuals, at least one of them being resident in India and all the partners shall be the agent of the Limited Liability Partnership but not of other partners.

Need for and significance LLP:

  • LLP format is an alternative corporate business vehicle that provides the benefits of limited liability of a company but allows its members the flexibility of organizing their internal management on the basis of a mutually arrived agreement, as is the case in a partnership firm.
  • This format would be quite useful for small and medium enterprises in general and for the enterprises in services sector in particular.
  • Internationally, LLPs are the preferred vehicle of business particularly for service industry or for activities involving professionals.

InstaLinks:

Prelims Link:

  1. Difference between LLP and companies.
  2. Difference between LP and LLP.
  3. What is a body corporate?
  4. Roles and functions of LLP partners.

Mains Link:

Write a note on limited liability partnerships.

Sources: the Hindu.