LIMITED LIABILITY PARTNERSHIP- IS IT A QUASI-

PARTNERSHIP, QUASI-CORPORATION OR SUI GENERIS?

CORPORATE LAW – I

TITLE:
LIMITED LIABILITY PARTNERSHIP- IS IT A QUASI-
PARTNERSHIP, QUASI-CORPORATION OR SUI GENERIS?

Submitted by
Group:
1411. Himanshu Gupta
14121005. Akanksha Dipankar

7th Semester, 4th Year, B.A.LL.B. (Hons.)

Submitted to
Mr. Shantanu Braj Choubey
Faculty of Corporate Law-I

CHANAKYA NATIONAL LAW UNIVERSITY,

PATNA
September, 2018.

1|Page
 LIMITED LIABILITY PARTNERSHIP- IS IT A QUASI-
PARTNERSHIP, QUASI-CORPORATION OR SUI GENERIS?

ACKNOWLEDGEMENT

The projects and presentations has been one of the most appreciated areas for the holistic
development of a student. It helps a student to be more curious, to know more and to
research more.
We would like to extend my deepest thanks to Mr. Shantanu Braj Choubey who has provided us
with all the possibilities to complete the project. We would also like to extend our regards to our
friends for their aspiring guidance, invaluably constructive criticism and friendly advice during
the project work.

Group:
1411. Himanshu Gupta
14121005. Akanksha Dipankar

2|Page
 LIMITED LIABILITY PARTNERSHIP- IS IT A QUASI-
PARTNERSHIP, QUASI-CORPORATION OR SUI GENERIS?

DECLARATION

We hereby declare that the research paper titled “LIMITED LIABILITY PARTNERSHIP- IS
IT A QUASI-PARTNERSHIP, QUASI-CORPORATION OR SUI GENERIS?” submitted
by us is based on actual and original work carried out by us. Any reference to work done by any
other person or institution or any material obtained from other sources have been duly cited and
referenced. I further certify that the research paper has not been published or submitted for
Publication anywhere else nor it will be send for Publication in the future.
I hereby warrant declare that:
This research paper authored by me is an original and genuine research work. It does not infringe
on the right of others and does not contain libelous or unlawful statements. It has not neither
been submitted for publication nor published elsewhere in any print/electronic form.
I have taken permission from the copyright holder to reproduce the matter not owned by me and
acknowledged the source.

Thank You.

Himanshu Gupta.
Akanksha Dipankar.

3|Page
 LIMITED LIABILITY PARTNERSHIP- IS IT A QUASI-
PARTNERSHIP, QUASI-CORPORATION OR SUI GENERIS?

TABLE OF CONTENT

Acknowledgement ................................................................................................................ 2

DECLARATION ....................................................................................................................... 3

Table Of Content.................................................................................................................. 4

OBJECTIVE OF THE STUDY ...................................................................................................... 6

HYPOTHESIS .......................................................................................................................... 6

RESEARCH METHODOLOGY ................................................................................................... 6

SOURCE OF DATA .................................................................................................................. 6

Primary Source: .......................................................................................................................... 6

Secondary Source: ...................................................................................................................... 6

LIMITATIONS OF THE STUDY .................................................................................................. 6

SCOPE OF THE STUDY ............................................................................................................ 7

1. INTRODUCTION ................................................................................................................ 8

2. HISTORY OF LLP ACT .......................................................................................................... 9

3. MEANING AND NATURE OF LLP........................................................................................ 11

3.1 MEANING:......................................................................................................................... 11

3.2 NATURE ............................................................................................................................ 11

3.2.1 LLP as a body corporate:- ............................................................................................ 12

3.2.2 LLP as a Partnership Firm ........................................................................................... 13

3.2.3 LLP as a sui generis ..................................................................................................... 13

4.COMARATIVE ANALYSIS OF PARTNERSHIP,COMPANY AND LLP ......................................... 14

4|Page
 LIMITED LIABILITY PARTNERSHIP- IS IT A QUASI-
PARTNERSHIP, QUASI-CORPORATION OR SUI GENERIS?

5.LLP World Wide ................................................................................................................ 18

5.1 Australia .............................................................................................................................. 18

5.2 North-America .................................................................................................................... 18

5.2.1 Canada.......................................................................................................................... 18

5.2.2United States ................................................................................................................. 18

5.3 Asia ..................................................................................................................................... 19

5.3.1China ............................................................................................................................. 19

5.3.2 Singapore ..................................................................................................................... 19

5.3.3 Japan ............................................................................................................................ 19

5.3.4 Kazakhstan ................................................................................................................... 19

5.4. Europe ................................................................................................................................ 20

5.4.1 Germany....................................................................................................................... 20

5.4.2 Greece .......................................................................................................................... 20

5.4.3 Hungary........................................................................................................................ 20

5.4.4 Poland .......................................................................................................................... 20

5.4.5 United Kingdom........................................................................................................... 20

5.5 Africa .................................................................................................................................. 21

5.5.1 Kenya ........................................................................................................................... 21

5.5.2 Nigeria.......................................................................................................................... 21

Conclusion........................................................................................................................... 22

BIBLIOGRAPHY .................................................................................................................... 23
Bare Acts ................................................................................................................................... 23

Books ........................................................................................................................................ 23

Links ......................................................................................................................................... 23

5|Page
 LIMITED LIABILITY PARTNERSHIP- IS IT A QUASI-
PARTNERSHIP, QUASI-CORPORATION OR SUI GENERIS?

OBJECTIVE OF THE STUDY

The researchers is going to research the above topic with some of the objectives which is sited
below:

1. To know about the LLP and its nature whether its a quasi-partnership, quasi-corporation
or sui generis?
2. And the fabric of faith that exist between the members of a company or between partners
does it also exist in the context of LLP?
3. Also to analyze the flexibility and the less complicated internal structure of a LLP.

HYPOTHESIS
LLPs may be chosen as the most appropriate form of organization.

RESEARCH METHODOLOGY
The researchers will be using doctrinal mode of research.

SOURCE OF DATA

Primary Source:
 Limited Liability Partnership Act,2008
 Case laws.

Secondary Source:
Textbooks and Websites.

LIMITATIONS OF THE STUDY

The researchers cannot opt for non-doctrinal mode of research and they have to be dependent
upon only doctrinal method which would include primary and secondary sources.

6|Page
 LIMITED LIABILITY PARTNERSHIP- IS IT A QUASI-
PARTNERSHIP, QUASI-CORPORATION OR SUI GENERIS?

SCOPE OF THE STUDY

The study will include the provisions of the Limited liability partnership Laws and case laws
supporting the arguments used in the research.

7|Page
 LIMITED LIABILITY PARTNERSHIP- IS IT A QUASI-
PARTNERSHIP, QUASI-CORPORATION OR SUI GENERIS?

1. INTRODUCTION
The law relating to limited liability is new to India. However in several other countries limited
liability partnerships are not new countries like United kingdom ,Singapore have a very robust
law to administer limited liability partnerships. These countries are economically developed and
the bureaucracy and the legal system in these countries are efficient and effective in their
respective rolls. Back home, the LLP Bill was introduce in the Rajya Sabha in 2006 ,and it came
into force in 2008. Apart from the Indian Partnership Act,1932 and the Companies Act,1952
which are veterans in their respective fields and which have withstood the test of times, no other
enactment that focused on the form of a business entity, was introduced in India. Limited
liability partnership is of a single type as it has only incorporated for business activities whereas
associations not for profit, with charitable, cultural religious or other such objectives in the form
of companies incorporated under the Companies Act.

This concept has obviously emanated from Section 4 of the partnership Act,1932 but it aims to
remove the fear of a business man about losing personal wealth while doing business in
partnership with another. It aims to make it easier for the enterprising Indian youth to take up the
business activity. It would not be an exaggeration to say that the legislature has done a
commendable job in introducing the concept of LLP, as the LLP Act combines best of both
worlds.

In this project work though it is a small contribution but an analysis of the comparative study of
the topic and not the usual verbatim extract of law presented in a lucid account in order to make
it useful and analytical.

8|Page
 LIMITED LIABILITY PARTNERSHIP- IS IT A QUASI-
PARTNERSHIP, QUASI-CORPORATION OR SUI GENERIS?

2. HISTORY OF LLP ACT

“The Limited Liability Partnership Act,2008 is a new enactment introduced for the first time
extending to the whole country. The application of the Act shall be, whether in full or by parts,
from the date or dates notified by the Central Government.”1

The concept of Societe en commandite or limited Partnership appears to have its origin in Italy
as a Medieval European business mode, shaped by the nobility who wanted to be in partnership
trade joining hands with the merchants without revealing its identity, so basically they did not
took part in carrying out the ventures. The central idea was provisioning of funds with a view to
share profit in an informally agreed partnership while limiting the loss. This arrangement came
to pass as the limited liability partnership. Eventually the idea spread to the other European
countries, particularly France, Germany and Great Britain also too far off countries like USA and
Japan. In India, in late 1970s the need for adoption of a law on limited partnership for small scale
unit appears to have come up for consideration of the Government, with press reports appearing
on and off about collection of information from various countries on the operation of LLPs under
their laws. And in late 1978, a newspaper report appeared to the effect that the Department of
Company Affairs proposed to bring a legislation providing for ‘Limited Partnership’ so as to
encourage small group of people enter manufacturing, trading or other business activities.

By introducing the concept of limited partnership through legislation, it would make it possible
for two or three persons to set up small business eliminating the need for cumbersome
procedures. Regulation and returns would be reduced to the minimum. It was indicated that the
new law, like the existing Partnership Act 1932, would be administered by the States. This leads
to Sanchar Committee’s suggestions that was-

 The creation of a small private company of a paid-up capital not exceeding five lakh
rupees exempt from the provisions identified as cumbersome for compliance under the
Companies Act,1956, and reserved for the small scale sector, as with the 807 items of
business then reserved for SSI units under the Industries(Development&
Regulation)Act,1956.

1
Krishnamurti D.S.R, Law Relating to Limited Liability Partnership, 2 nd edn,2009, p.2 Taxmann

9|Page
 LIMITED LIABILITY PARTNERSHIP- IS IT A QUASI-
PARTNERSHIP, QUASI-CORPORATION OR SUI GENERIS?

 New legal frame-work affording promotional support

Further after many developments Report of Naresh Chandra and J.J. Irani Committees suggested
to adopt a new form of business in India for the small units engaged both in manufacture and
services, and that was LLP which was also considered to be the best form of business to foster
the future growth of the three corporate-business-related professions of CAs, CSs, CWAs to
shape them globally with India imprint. After the lapse of some 27 years since the idea was first
mooted- the Government came up with the release of a concept paper on LLP for public
response.

All these ideas and efforts culminated in the Government taking the concrete step forward of
introduction of the LLP bill in the Rajya Sabha on 15th December,2006. The English LLP
Act,2000 and the Singapore Act of 2005 appear to have served as the beacons in framing the
LLP Bill,2006. Later on after examining the Act it seems to be necessary to bring extensive
changes under the Bill, hence it was proposed to withdraw the Limited Liability Partnership Bill
and introduce a fresh Bill incorporating the changes and LLP Bill,2008 was brought.

As said by CJI ALTAMAS KABIR—Law is not a dry subject, it’s not static, it’s dynamic and
this applies on LLP Bill of 2008 in which changes were brought to fill the gaps and
imperfections.

10 | P a g e
 LIMITED LIABILITY PARTNERSHIP- IS IT A QUASI-
PARTNERSHIP, QUASI-CORPORATION OR SUI GENERIS?

3. MEANING AND NATURE OF LLP

LLP is a very useful form of organisation, as it combines best of two worlds as it draws heavily
from the Indian Partnership Act, 1932 to incorporate partnership principles, and also draws
heavily from the provisions of the Companies Act,1956 in order to provide built in safeguards to
protect not only partners but also the third parties who deals with an LLP.

Under LLP trust and mutual faith is fundamental for the survival of any partnership. Partners
should conduct themselves as partners and honour the rights and legitimate expectations of each
and every other partner; if not more at least to the extent of what is provided in the LLP
Agreement and the LLP Act and Rules. To Borrow the words of George Orwell,” All Partners
are Equal; and no one is more equal to others”. Therefore if partners understand to respect and
also to assert their rights, limited liability partnership will surely be life long partnership.

3.1 MEANING:
“Clause(n) of sub-section 2 of the LLP Act, 2008 defines “limited liability partnership” as a
partnership formed and registered under this Act. Hence, the basic nature of the LLP is that of a
partnership formed and registered under the provisions of LLP Act, 2008.”2

3.2 NATURE
“According to section 3 of the LLP Act, 2008, LLP is a body corporate having perpetual
succession and a legal entity separate from its partners. Any change in the partners of such
partnership shall not affect its liabilities. LLP is more akin to a company than to a partnership.
Basic nature of a LLP can be summarised as under:

(1) It is a body corporate formed and incorporated under LLP Act, 2008.
(2) It is a separate legal entity distinct from its partners.
a) It is a juristic person.
b) It can sue and be sued in its own name.
c) It can hold assets(movable and immovable) in its own name.

2
CA. Jain Pramod, Limited Liability Partnership, 2nd edn,2013,p.13Corporate law Adviser

11 | P a g e
 LIMITED LIABILITY PARTNERSHIP- IS IT A QUASI-
PARTNERSHIP, QUASI-CORPORATION OR SUI GENERIS?

d) It can act as a trustee if the LLP Agreement so provides.

e) However, it is not a citizen as to claim fundamental rights granted to citizens.
(3) It shall have perpetual succession.
a) Partners may come and go, but the LLP would continue until it is dissolved/
wound up as per law or as provided in the LLP Agreement.
b) Any change in the partners of a LLP shall not affect the existence, rights or
liabilities of the LLP.
(4) According to section 4 of LLP Act the provisions of the Indian Partnership Act, 1932
shall not apply to a LLP.”3

3.2.1 LLP as a body corporate:-

As we know LLP is a good hybrid of partnership and company, so it removes defects of
unlimited liability under partnership and rigidity of the provisions as prevalent under Company
Law. So lets see how LLP is a body corporate and the legal consequences thereof.

LLP is a body corporate means LLP is a legal entity separate from that of its partner, that is has a
status of an independent (legal) personality and much similar to a natural person in all respects.
Further LLP will be known by its name irrespective of the persons who are Partners it means
legal entity separate from its partners.

Another aspect heavily drawn from Companies Act is a LLP can buy and sell properties in his
name further can sue or can be sued and also has perpetual succession with a common seal.

If one closely observe then will be able to find that things that is mentioned in section 3 is not the
only borrowings LLP had made further the procedural aspect relating to change in name,
registered office, changes among partners, compliance requirements, scheme of compromises
and arrangements, offences and prosecution, compounding of offences and also as regards
winding up and dissolution are some more characteristics a LLP had drawn from company law.

3
“Ibid”

12 | P a g e
 LIMITED LIABILITY PARTNERSHIP- IS IT A QUASI-
PARTNERSHIP, QUASI-CORPORATION OR SUI GENERIS?

3.2.2 LLP as a Partnership Firm

The law relating to partnerships is not new. Originally they were part of the Indian Contract
Act,1872. When a partnership commences it is founded on principles of partnership which are
enshrined in the Indian Partnership Act,1932. Merely because there is a new law relating to
limited liability partnerships, it does not in any manner dilute or do away with the requirement
for adhering to the established principles of partnerships. Mutual trust must exist at all times
amongst partners. The essence of a partnership lies in maintaining the fabric of faith between the
partners. LLP draws heavily from the Indian Partnership Act,1932 to incorporate partnership
principles, duties and liabilities of partners, mutual rights and liabilities of partners, and grants
adequate liberty of partners to organize their role and responsibility as regards their LLP. The
LLP Act has drawn heavily from Sections 9 to 36 of the Indian Partnership Act.

3.2.3 LLP as a sui generis

Sui generis is a Latin term which means a class of its own kind. “The reason for the same is
given that it is a unique business vehicle to address the vacuum between partnership and
company law. So, LLP is seen as a marriage of principles of company law and partnership law in
order to address the deficiencies in both the areas for small scale business and professional
firms.”4

4
https://lawyersgyan.com/blog/limited-liability-partnership-is-it-quasi-partnership-quasi-corporation-or-sui-generis/
accessed on 1st Sept,2018 at 5:49IST

13 | P a g e
 LIMITED LIABILITY PARTNERSHIP- IS IT A QUASI-
PARTNERSHIP, QUASI-CORPORATION OR SUI GENERIS?

4.COMARATIVE ANALYSIS OF PARTNERSHIP,COMPANY AND LLP

Category Partnership Company LLP

Applicable Law ‘The Indian ‘Companies Act, ‘The Limited

Partnership Act, 1932’ 2013’ Liability Partnership
and the Rules made Act, 2008’ and the
there under Rules made there
under

Registration Optional Registration with Registration with

Registrar of ROC Registrar of LLP
required. required.

Source of Creation Contract Law Law

Legal Personality Not a distinct entity Has a distinct legal Has a distinct legal
from its’ members entity as per the entity as per the
Companies Act. Limited Liability
Partnership Act, 2008.

Suffix No Suffix ‘Limited’: for Public ‘Limited Liability

Company Partnership’ or ‘LLP’
Or .
‘Private Limited’: for
Private Company

Expenses of Creation Negligible Private limited The cost of Formation

company varies in is statutory filling
between Rs 11000/- to fees, comparatively
Rs. 15000/- lesser than the cost of
formation of
Company.

Perpetual Succession Depends upon the will Members may come Partners may come

14 | P a g e
 LIMITED LIABILITY PARTNERSHIP- IS IT A QUASI-
PARTNERSHIP, QUASI-CORPORATION OR SUI GENERIS?

of partners and go but the and go

Company will remain but LLP will remain
forever. forever.

Charter Partnership Deed Memorandum of LLP Agreement .

determines its scope of Association and
operation and rights Article of Association. Rights, Duties and
and duties of the obligation of the
partners. Rights, Duties and partners are governed
obligation of the by LLP Agreement.
Rights, Duties and directors are governed
obligation of the by AOA and resolution
partners are governed passed by shareholders
by Partnership Deed. or directors.

Formalities of Partnership Deed along Prescribed e-forms for Prescribed e-forms

Incorporation with prescribed form / the Memorandum & are filled with
affidavit must be duly Articles of Association prescribed fees to the
filled with Registrar of are filled with Registrar of LLP.
firms along with prescribed fees to
requisite filing fee. Registrar of Companies

Legal Capability to Sue Only registered can sue and be sued can sue and be sued
partnership can sue
against and be sued by
third party

Foreign Participation Only Indian Nationals Foreign Nationals can Foreign Nationals can
can form Partnership become a member in become a Partner.
Firm in India an Indian Company.

Required Number of Minimum 2 Maximum Ranges from 2 to 10 in Minimum 2

Members 20 Private Company Maximum 100
and
Minimum 7 members
Public Company.

Ownership of Assets Joint ownership of all The company has The LLP has

15 | P a g e
 LIMITED LIABILITY PARTNERSHIP- IS IT A QUASI-
PARTNERSHIP, QUASI-CORPORATION OR SUI GENERIS?

the assets of the ownership of assets. ownership of assets.

partnership firm
Members have no Partners have no
interest in the property interest in the
of the company. property of LLP.

Liability of Unlimited due to Limited to the value Limited to the extent

Partners/Members Mutual Agency. of unpaid amount per of their contribution,
Partners are severally share.
and jointly liable for Unlimited in case of
acts of other partners intentional fraud or
and the firm. Liability wrongful act of
can extend to even omission/
their personal assets. commission.

Income Tax Liability 30% plus Education 30% Plus Surcharge as 30% plus Education
cess as applicable. applicable. cess as applicable.

Agency Mutual Agency The directors act as Partners act as agents

agents of the company of LLP and not of the
and not of the members other partners.

Transfer / Inheritance of Not transferable. Ownership is easily Regulated by the LLP

Rights transferable by mere Agreement .
selling of the shares.

Rights of Legal Heirs in They get the refund of Shares are transmitted They get the refund of
Case of death of the capital contribution to the legal heirs. the capital
Partner/Member + share in accumulated contribution + share
profits, if any. in accumulated
profits, if any.

Legal Heirs Status Legal heirs will not Any one can hold Legal heirs will not
become partners shares. become partners

16 | P a g e
 LIMITED LIABILITY PARTNERSHIP- IS IT A QUASI-
PARTNERSHIP, QUASI-CORPORATION OR SUI GENERIS?

Director Identification No identification Each director is must Each Designated

Number(DIN) / number is required by have a DIN before Partners must have a
Designated Partner any partner being appointed as DPIN before being
Identification Number Director. appointed as
(DPIN) Designated Partner.

Digital Signature Not Required. Since e-forms are filled Since e-forms are
electronically, so filled electronically,
minimum one Director so minimum one
should have Digital Designated Partner
Signature. should have Digital
Signature.

Modes of Dissolution By agreement, mutual By agreement or by By agreement or by

consent, insolvency, order of NCLT order of NCLT.
death,
court order.

17 | P a g e
 LIMITED LIABILITY PARTNERSHIP- IS IT A QUASI-
PARTNERSHIP, QUASI-CORPORATION OR SUI GENERIS?

5.LLP WORLD WIDE

5.1 Australia

 Governed on a state-by-state basis in Australia . In Queensland, a LLP is comprises

of atleast one general partner and one limited partner.

5.2 North-America

5.2.1 Canada

 LLPs are primarily for lawyers and accountants.

 But in British Columbia, the Partnership Amendment Act, 2004 permits LLPs for
other professionals and businesses as well.

5.2.2United States

 LLP laws were passed to shield innocent members of these partnerships from liability
after the collapse of real estate and energy prices in Texas in the 1980s.
 It is popular form of organization among professionals. Since all states have passed
variations of the Revised Uniform Partnership Act formation of an LLP requires filing
certificates with the county and state offices.
 Section 306(c) of the Revised Uniform Partnership Act (1997) (RUPA), has been adopted
by a majority of the states which grants LLPs limited liability similar to that of a
corporation.

Mostly partners in an LLP can be held personally liable for contract and intentional tort
claims except in a few states.
 The profits of an LLP are allocated among the partners for tax purposes and also avoids
the problem of double taxation.
 In US some states have combined the LLP and LP forms to create “Limited Liability
Limited Partnerships”.

18 | P a g e
 LIMITED LIABILITY PARTNERSHIP- IS IT A QUASI-
PARTNERSHIP, QUASI-CORPORATION OR SUI GENERIS?

5.3 Asia

5.3.1China

 It is used by professions which are knowledge based and industries dealing in technical
services.
 The Law acts as protection for willful misconduct or gross negligence of one partner or a
group of partners.

5.3.2 Singapore

 Formed under the Limited Liability Partnerships Act 2005 and have body corporate
status.
 Tax Transparency: to target the partners rather than the partnership it is treated like a
general partnership.

5.3.3 Japan

 Full limited liability.

 Treated as pass-through entities for tax purposes.
 Since a partner in LLP has to play an active role in the business, so it is more suitable
for joint ventures and small businesses to companies.
 Lawyers or accountants are required to do business through an unlimited liability entity
so LLPs are unpopular among them.
 A Japanese LLP exists as a contractual relationship between the partners.

5.3.4 Kazakhstan

 All partners have limited liability.

 Except few private business such as banks, airlines, insurance companies etc.( Joimt
stock Companies) almost any private business may be incorporated as an LLP.
 It is an Limited Liability Corporation (LLC).
 Business is conducted by corporate bodies and not partners.

19 | P a g e
 LIMITED LIABILITY PARTNERSHIP- IS IT A QUASI-
PARTNERSHIP, QUASI-CORPORATION OR SUI GENERIS?

5.4. Europe

5.4.1 Germany

 It is merely an association of non-commercial professional.

 Despite not being a corporate entity it can sue and be sued, own property and act under
the partnership's name. Jointly and several liability for all the partnership's debts, except
where all liabilities from professional misconduct are limited to the extent of their capital.
 No corporate or business tax is levied. Taxes are imposed on partners' respective income.

5.4.2 Greece

 Partners own personal shares that can be sold by a partner only when all other partners
agree.
 The business is managed either directly by the board of partners or by a General
Manager.

5.4.3 Hungary

 Minimum two members are required: one must have unlimited liability and the other one
must have limited liability.

Has legal personhood.

5.4.4 Poland

 Joint and several liability for the partnership's debts otherthan those arising from another
partner's misconduct or negligence.
 Popular among some "high risk" occupations, such as lawyers, doctors, accountants,
brokers, sworn translators etc.

5.4.5 United Kingdom

 A UK based LLP is a corporate body therefore it has a perpetual succession i.e

continuing legal existence independent of its members.
 “Joint” liability of partners is limited to the extent agreed by them in the "LLP
agreement". There is no "several" liability for each other's actions. Members in an LLP
cannot, in the absence of fraud or wrongful trading, lose more than what they had
invested.
 Due to tax-transparency it pays no corporation tax or capital gains tax. Since income
and/or gains are distributed gross to partners not as PAYE employees but as self-
employed persons, partners are liable for their own taxation.
 Since simple partnership-based regulations apply by default provisions no written LLP
agreement is required.

20 | P a g e
 LIMITED LIABILITY PARTNERSHIP- IS IT A QUASI-
PARTNERSHIP, QUASI-CORPORATION OR SUI GENERIS?

 Not a corporate body despite legal existence and is time limited and hence not
"continuing."

Popular among accountants to retain the tax structure of traditional partnerships whilst
adding some limited liability protection.

5.5 Africa

5.5.1 Kenya

 Have Legal Personality due to registration by RoC as per LLP Act, 2011.
 The liability of the partners is limited to extent of unpaid amount over the capital.
 Liability for omissions or actions done by themselves:
if they lacked authority; or
aggrieved had no reason to believe that such person was a partner.

5.5.2 Nigeria

 Have legal personality.

 First register a partnership then it gains the status of LLP.

21 | P a g e
 LIMITED LIABILITY PARTNERSHIP- IS IT A QUASI-
PARTNERSHIP, QUASI-CORPORATION OR SUI GENERIS?

CONCLUSION
In Partnership a person can become liable as a partner despite not being a partner due to the
principle of estoppel which is applicable in ‘Partnership by Estoppel’ and ‘Partnership by
Holding Out’. The laws are bent to promote business and limit the liability of the partners who
were in-fact personally liable.

Partnership appears similar to Joint Venture and ostensibly they appear identical. It is only on the
basis of the deed upon which they are formed that they can be distinguished. JV is based on
Memorandum of Understanding whereas Partnership is on Partnership Deed. The aim of any
company or Partnership is to share the profits earnt. All the partners receive profits but all those
who receive profits need not necessarily be a partner as in case of sub-partnership or diversion of
profit by a partner to a creditor. Hence the true test of partnership is not sharing of profits but
‘Mutual Agency’. This made it practically difficult to distinguish between them and identify
whether the enterprise is actually a partnership firm or not.

A partnership could in fact be dissolved by the court against the will of the Partners on account
of the death of an active partner and if in the opinion of the court the partnership firm would
incur loss due to inefficiency of the remaining partners.

In limited liability partnership only two partners are required which can be both natural and
artificial. Out of these during appointment of a ‘Partner’ even a person who has been found
guilty on grounds of moral turpitude and convicted for six months is capable to become a Partner
and invest capital even though he is not competent to become a ‘Designated Partner’.

No Memorandum of Association or Article of Association is required to be submitted.

Submission of prescribed form is enough stating the Name, Address and object of the LLP is
enough.

Therefore Limited Liability Partnership being hybrid of Partnership and a Company is sui-
generis i.e unique and of its’ own kind.

22 | P a g e
 LIMITED LIABILITY PARTNERSHIP- IS IT A QUASI-
PARTNERSHIP, QUASI-CORPORATION OR SUI GENERIS?

BIBLIOGRAPHY
Bare Acts:

The Partnership Act,1932

The Companies Act 2013.

The Limited Liability Partnership Act,2008

Books:

R.K Bangia, Law of Contracts

Links:

https://www.legalraasta.com/difference-between-llp-and-partnership/

YouTube Lectures by:

CA Mohit Agarwal

Sudhir Sachdeva

23 | P a g e