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Limited Liability Partnership: Overview of LLP in India
Limited Liability Partnership: Overview of LLP in India
These days the concept of limited liability partnership has become one of the most recognised
ways of doing business in all countries of the world. India is also among those countries where
the business is carried on in the form of limited liability partnership. India introduced its
Limited Liability Partnership Act in 2008. A Limited Liability Partnership also called as an
LLP combines features of both the Partnership and the Company into one single organisation.
In other words, LLP is a way of doing business that provides the advantages of limited liability
of a company and at the same time gives flexibility to its members as in the case of partnership
firm.
ORIGIN OF LLP
The concept of Limited Liability Partnership emerged in the early 1990s in the United States
in response to the sudden fall in real estate and early prices in Texas in the 1980s and the
subsequent effect it had on the banks and other financial institutions. This collapse led to a
large wave of bank and savings and loan failures. Because the amounts recoverable from the
banks were small, efforts were made to recover assets from the lawyers and accountants who
had advised the banks in the early 1980s. The reason was that partners in law and accounting
firms were subject to the possibility of huge claims which would bankrupt them personally,
and the first LLP laws were passed to shield innocent members of these partnerships from
liability. Thus, the first ever law on LLP was enacted in Texas on 26th August 1991, which
was then followed by other countries of the worlds. Many countries that have recognised the
concept of LLPs include Canada, Germany, Japan, China, Greece, Singapore, etc., India being
one of them.
Finally the Limited Liability Partnership (LLP) Bill, 2008 received the approval of the Cabinet
on 1st May 2008. Both Houses of Parliament passed the bill without any changes. The Bill then
received the assent of President on 7th January 2009. In India, The Limited Liability
Partnership Act, 2008 was published in the official Gazette of India on January 9, 2009, and
has been notified with effect from 31 March 2009. The LLP Act, 2008 thereby makes provision
for the formation and regulation of limited liability partnerships and matters connected with it.
CONCLUSION
Though India recognised the concept of LLP very late, LLP in India has finally found its space.
LLP, which is a combination of both company and partnership, is beneficial to small and
medium business enterprises. The concept of LLP is also encouraged by the Government as it
provides various tax benefits and enables the entrepreneurs to focus on the core activities of
the business. It is the type of organisation that is easy to maintain while at the same time
providing limited liability to the owners. LLP is one of the simplest forms of business which is
easy to incorporate and manage. Because of its nature, LLP has become very popular these
days, and a number of firms and companies are now getting converted into LLPs.