Introduction To Limited Liability Partnership Act Prepared by- Ms. Neetu Kushwaha

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LIMITED LIABILITY PARTNERSHIP
(LLP)ACT, 2008
Course Co-Ordinator:
Ms. Neetu Kushwaha

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LIMITED LIABILITY PARTNERSHIP ACT,
2008
• The act came into Existence in 7th January, 2009.
• The Act contains 81 Sections, 14 chapters and 4
Schedules.
• The extends to whole of India

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WHAT IS LIMITED LIABILITY
PARTNERSHIP (LLP)?
The LLP act states, “LLP means a partnership
formed and registered under the act”. [Sec. 2(n)]
Thus, an LLP comes into existence after its
registration/corporation under LLP Act, 2008.

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FEATURES OF A LIMITED LIABILITY PARTNERSHIP
FIRM:
1. Incorporated body: Every LLP is an incorporated entity which is
formed and incorporated under the provisions of the LLP Act, 2008.
2. Body Corporate: LLP is a body Corporate registered under LLP Act,
2008.
3. Minimum and Maximum partners: An LLP shall have at least two
partners. There is no limit on maximum number of partners.
4. Separate Legal Existence: LLP has a separate legal existence from its
partners. It can enter into contract with its partners and sue on partners
and can be sued by partners.
5. Perpetual succession: LLP is a legal entity with perpetual succession. it
can be wound up in accordance with the provisions of the act

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6. Partners by Agreement: The partners of LLP are those who become
partners of the LLP in accordance with the LLP agreement. However, the
persons named in the incorporation document and who subscribe to the
incorporation document shall become partners of it.
7. Designated Partner: Every LLP shall have at least 2 designated partners.
This must be individual persons and at least one of them shall be resident of
India.
8. Limited Liability: The liability of a partner in LLP is limited to his
contribution to the LLP. A partner of LLP is not personally liable for any
obligation or liability of LLP.
9. Common seal: An LLP can have a common seal, if it decides to have it.
10. Mutual Rights and duties of partners and LLP: the mutual rights and
duties of partners are governed by LLP agreement.

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ADVANTAGES OF LLP:
1- Separate legal entity: An LLP is a separate legal entity. This means
that it has assets in its own name and can sue and be sued. Furthermore,
one partner is not responsible or liable for another partner’s misconduct
or negligence.
2- No owner/manager distinction: An LLP has partners, who own and
manage the business. This is different from a private limited company,
whose directors may be different from shareholders. For this reason,
VCs do not invest in the LLP structure.
3- Flexible agreement: The partners are free to draft the agreement as
they please, with regard to their rights and duties.
4- Limited liability: The liability of the partners is limited to the extent
of his/her contribution to the LLP. Unless fraud has been detected, the
personal assets of the partner are protected from any liability of the LLP.

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5- Fewer compliance requirements: An LLP is much
easier and cheaper to run than a private limited
company as there are just three compliances per year.
On the other hand, a private limited company has a lot
of compliances to fulfil and conduct an audit of its
books.
6- Easy to wind-up: Not only is it easy to start, it’s
also easier to wind-up an LLP, as compared to a
private limited company. While it still takes two to
three months to complete this process, it can take over
a year to close a private limited company.

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DISADVANTAGES OF LLP:
1- Inability to raise VC funding: VCs would be unwilling to invest in
an LLP structure. This is because all ‘shareholders’ in an LLP must be
partners, which have certain responsibilities toward the entity. No VC
wants any of these responsibilities, and would, therefore, only invest in a
private limited company.
2-Rights of partners: An LLP can be structured in such a way that one
partner has more rights than another. So, it isn’t a one vote per share
system. So, some lesser partners may feel compromised if higher
shareholders choose to move the business in a direction that affects their
interests.
3- Greater penalties: An LLP’s compliances are minimal, but if you
don’t complete them, you could end up paying more in fines than you
would with a private limited company. These fines can escalate to Rs. 5
lakhs for a single year.

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Thanks!