Learning Objectives

At the end of this session, you will be able to

understand:

What is LLP

Salient Features of LLP

Differentiate between LLP & Company

Various Characteristics of LLP

 What is LLP 
• A Limited Liability Partnership is a body corporate which has separate legal entity &
perpetual succession.
• Its existence, rights or liabilities are not affected by any change in the partners.

• LLP form of entity was introduced through LLP Act - 2008

• It is an alternative corporate business form that offers the benefit of limited liability to the
partners at low compliance cost.
• This form of entity integrates both the features of both the traditional form of partnership
firm & Limited Liability Corporations.

• LLP form of entity is suitable for small & medium type of businesses & professional
organizations & for investment by venture capital.
• Partnership Act -1932 is not applicable to LLP.
 What is LLP 
• A Limited Liability Partnership is a body corporate which has separate legal
entity & perpetual succession.
• Its existence, rights or liabilities are not affected by any change in the partners.

• LLP form of entity was introduced through LLP Act - 2008

• It is an alternative corporate business form that offers the benefit of limited
liability to the partners at low compliance cost.
• This form of entity integrates both the features of both the traditional form of
partnership firm & Limited Liability Corporations.
• LLP form of entity is suitable for small & medium type of businesses &
professional organizations & for investment by venture capital.
• Partnership Act -1932 is not applicable to LLP.
 Salient Features of LLP 
• Perpetual Succession

• Separate Legal Entity

• Mutual Agency:
• Mutual Agency is the legal relationship between partners in a partnership
where each partner has authorization powers & the ability to enter the
partnership into business contracts.

• It means each partner in the partnership is an agent in the business & the
authority to make business decisions that commit or bind the partnership, as a
whole, to a business agreement with a third party or entity.
• All partners are Agents of LLP & the actions of one partner do not bind the
other partners.
 Salient Features of LLP 
• LLP Agreement

• An agreement between all partners govern the rigts & duties of all the partners.
Also, the partners can devise the agreement as per their choice.
• Unlike shareholders of a company partners can directly manage the affairs of
LLP/Business i.e. in case of LLP there is no separation between the management
& ownership

• Artificial Legal Person

• For all legal purposes LLP is a artificial person. A legal process creates it & it
has all the rights of an individual. It is invisible, intangible & immortal but not
fictitious since it exists.

• Common Seal : If partners decide then LLP can have a common seal.Seal hasto
be kept in safe custody of a responsible official
 Salient Features of LLP 
• Common Seal : If partners decide then LLP can have a common seal. Seal has
to be kept in safe custody of a responsible official.
• The common seal can be affixed only in the presence of at least two designated
partners of LLP.

• Limited Liability
• The Liability of each partner has limitation to his agreed contributions to the
LLP. It provides personal liability protection to its partners.
• Every partner is an agent of LLP for the purpose of business of the entity.
However , he /she is not an agent of other partners.

• Minimum & Maximum No of Partners in an LLP: LLP must have at least two
partners & at least two individuals as Designated partners(akin to Directors of
a company )
• At any time at least one designated partner would be resident in India.
• Only designated partners are responsible for compliance with the Act.
 Salient Features of LLP 
Minimum & Maximum No of Partners in an LLP:
 LLP must have at least two partners & at least two individuals as Designated
partners(akin to Directors of a company )
• At any time at least one designated partner would be resident in India.
• Only designated partners are responsible for compliance with the Act.

• There is no maximum limit on the number of maximum partners in an entity.

• Business Management & Business Structure

• The Partners of LLP can manage their business. However , the designated
partners are responsible for legal compliances.

•
 Salient Features of LLP 
Business for Profit only
 LLP can not be formed for charitable or for non-profit purposes.
 LLP can be formed for a lawful business with a view to earning profit.
 LLP under obligations to maintain annual accounts reflecting true & fair view
of the state of affairs.
 A statement of accounts & solvency must be filed every year with the Registrar.
 Accounts of LLP must be audited subject to any class of LLP being exempted
from this requirement by the Central GOVT.
 Investigation:
 Power to investigate the affairs of an LLP resideswith the Central Govt.
 Compromise or Arrangement like a merger or amelgmation needs to be done in
accordance with the provision of LLP Act.

•
 Salient Features of LLP 
Conversion into LLP
 A firm , private Company or an unlisted public Company is allowed to be
converted into a LLP in accordance with the provision of the Act.

 E-filing of Documents

 Winding up of LLP
 Winding up of LLP may be either voluntarily or by Tribunal established under
the Company Act-2013 or by High Court

 The Indian PARTNERSHIP Act is not be applicable to LLP

•
 Advantages of forming an LLP  
Some of the advantages of forming an LLP are as under:

 LLP is an organized entity

 LLP operates based on an Agreement

 LLP offers flexibility without imposing detail legal & procedural requirements.

 LLP is easy to form . It offers limited liability to all partners.

 LLP has flexible capital structure & it issy to dissolve.

 The members or partners of an LLP can be sued & they can also sue some one
as it is a legal entity.

•
 Difference between LLP & Partnership firm  
ulars LLP Partnership Firm

ration under the

ty

ration Registration with Registrarof LLP required Registration is optional

mandatorily

of Registration 7-10 days in complete process 5-7 days

er of Partners & Minimum 2 , Maximum No limit. No minor can Minimum -2, Maximum -
requirement be partner 20, Minor can be a
partner
 Difference between LLP & Partnership firm  
ticulars LLP Partnership Firm

ement between LLP agreement governs the operation, Partnership Deed ……

Partners management & Decision making ,
methodologies & other activities of the LLP
version/ Shares can be easily transferred after Shares can be transferred to
sferability obtaining required consent from all the another person after
partners of LLP obtaining consent of all the
The transferee can not become the partner partners of Partnership firm
automatically

pliance Mandatory to file annual return to Ministry No requirement of Annual

of Corporate Affairs return filing

e of Entity Name to contain LLP as Suffix Any name as per choice

 Difference between LLP & Partnership firm  
ulars LLP Partnership Firm

on Under Law Two people can start the

Partnership firm

ct Entity It has separate legal entity under LLP Act Not a separate Legal
Entity

f creation Statutory filing fee Negligible fee

n Participation Foreign nationals can be partners in an LLP Foreign nationals can not
be partners in
Partnership firm
rship of Assets The LLP has ownership of assets The partners have equal
ownership on assets
 Difference between LLP & Partnership firm  
ulars LLP Partnership Firm

Proceedings LLP can sue & it can be sued Only Registered

Partnership can sue any
partner or any other
person

tance of entity Transferred as per regulations of LLP Act Transferred to the legal
heir

tual Succession LLP has perpetual succession & partners may No perpetual Succession.
come & go It depends on the Will of
Partners
mon Seal It denotes the signature of LLP No such concept

rement for Each partner to obtain DPUN before he/She is No such requirement
 Difference between LLP & Partnership firm  
ulars LLP Partnership Firm

Signature At least one Designated Partner must have No such requirement

digital Signature

tion of a Partner 30 days notice required Person As per Partnership Deed

enance of Minutes LLP is required to record minutes of meeting of No such requirement

Partners

pal/Agent Partners act as Agent f LLP & not of other Partners are Agent of the
onship Partners firm & other partners

g Rights As per the terms of LLP Agreement As per the terms of

Partnership Deed

ution By Agreement, Court order, Insolvency, Mutual It should be done

 Difference between LLP & Partnership firm  
neet to file LLP Partnership Firm
al ticulars

al Filing It needs to be filed with Registrar of Companies No such requirement

of Accounts All LLPs except those having turnover less than Audit required under the
40 Lakhs or Rs 25 lakhs contribution in any provision of Income Tax
fiscal year are required to get their accounts Act
audited annually as per LLP Act
 Difference between LLP & Partnership firm  
neet to file LLP Private Company
al ticulars

al Filing It needs to be filed with Registrar of Companies Compliance required as

per Company Act

of Accounts All LLPs except those having turnover less than Audit required under the
40 Lakhs or Rs 25 lakhs contribution in any provision of Company Act
fiscal year are required to get their accounts
audited annually as per LLP Act