Limited Liability Partnership Format of Business was introduced in India by way of Limited Liability Partnership Act, 2008. The underlying motive behind the introduction of Limited Liability Partnership (LLP) is to provide a form of business organization that is easy to carry on while at the same time providing limited liability to the owners.
A LLP has the advantages of both the Company and Partnership in the way that one partner is not responsible or liable for another partner's misconduct or negligence. Therefore, all partners have a form of limited liability or immunity against each individual's protection within the partnership, similar to that of the shareholders in a company. LLP has another advantage over a company, unlike corporate shareholders, the partners have the right to manage the day to day business of the firm. An LLP also protects partner against any errors, omissions, incompetence, or negligence of the LLP's employees or other agents. LLP is one of the easiest form of business to incorporate and manage.
Principal Features of a Limited Liability Partnership in India -
1) A minimum of two natural persons over 18 years of age are required. They are called Designated partners. It can have a maximum of any number of Partners.The Designated Partners needs to be over 18 years of age and must be a natural person. There are no restriction in terms of citizenship or residency. Therefore, the LLP Act 2008 allows Foreign Nationals including Foreign Companies & LLPs to incorporate a LLP in India provided at least one designated partner is resident of India.
2) Unlike a company there is no requirement of any minimum paid up capital in LLP. One can form a Limited Liability Partnership with any amount of capital. Capital contribution may be done in the form of both tangible and/or intangible property.
3) The ownership of a LLP can be easily transferred to another person by inducting them as a Designated Partner of the LLP. LLP is a separate legal entity separate from its Managing Partners, so by changing the Managing Partners, the ownership of the LLP can be changed.
4) A LLP being a separate legal entity, can acquire, own, enjoy and alienate, property in its own name. No Partner can make any personal claim upon the property of the LLP as long as the LLP is a going concern.
5) A LLP is not required to get its books of accounts audited if it has less than Rs. 40 lakhs of turnover and less than Rs.25 lakhs of capital contribution. As a result it would save the cost of auditing and other regulatory complainces thus making it ideal for startups and small businesses that are just starting their operations.
IT CAN BE SAFELY ASSUMED THAT AS OF NOW IN INDIA, LIMITED LIABILITY PARTNERSHIP(LLP) IS THE BEST TYPE OF BUSINESS FORMAT FOR THE BUSINESSES WHICH LIKE TO ENJOY BEST OF BOTH WORLDS. THUS LLP ENJOYS THE STATUS OF A CORPORATE ENTITY AT A COST OF A PARTNERSHIP FIRM.