Knowledge Base - General
- LLP is an alternative corporate business form that gives the benefits of limited liability of a company and the flexibility of a partnership.
- The LLP can continue its existence irrespective of changes in partners. It is capable of entering into contracts and holding property in its own name.
LLP shall be a body corporate and a legal entity separate from its partners. It will have perpetual succession.
LLP form is a form of business model which:
- is organized and operates on the basis of an agreement.
- provides flexibility without imposing detailed legal and procedural requirements
- enables professional/technical expertise and initiative to combine with financial risk taking capacity in an innovative and efficient manner
- Under traditional partnership firm, every partner is liable, jointly with all the other partners and also severally for all acts of the firm done while he is a partner.
- A basic difference between an LLP and a joint stock company lies in that the internal governance structure of a company is regulated by statute (i.e. Companies Act, 1956) whereas for an LLP it would be by a contractual agreement between partners.
- The management-ownership divide inherent in a company is not there in a limited liability partnership.
The LLP framework could be used for many enterprises, such as:-
- Persons providing services of any kind
- Enterprises in new knowledge and technology based fields where the corporate form is not suited.
- For professionals such as Chartered Accountants (CAs), Cost and Works Accountants (CWAs), Company Secretaries (CSs) and Advocates, etc.
No. The essential requirement for setting LLP is ‘carrying on a lawful business with a view to profit’.
No, these shall not be applicable to LLPs.
As per provisions of the LLP Act, in the absence of any LLP agreement, the mutual rights and liabilities shall be as provided for under Schedule I to the Act. Therefore, in case any LLP proposes to exclude provisions/requirements of Schedule I to the Act, it would have to enter into an LLP Agreement, specifically excluding applicability of any or all paragraphs of Schedule I.
Since LLP shall be in the form of a body corporate, it is proposed that to address various situations applicable to LLPs as such, the relevant provisions of the Companies Act, 1956 may be made applicable to LLPs at any time in the future by Notification by Central Government, with such changes or modifications as appropriate.