Indian LLP Act (2008) Notes.

Limited Liability Partnership (LLP).

A typical partnership form of the business suffers from the problem of unlimited liability. Liabilities of partners of a firm extend right up to their personal assets. This makes regular partnerships undesirable for a lot of entrepreneurs. One solution for this issue exists in the form of Limited Liability Partnerships, better known as LLP.

Limited Liability Partnerships (LLP)

Partners of typical partnership firms have unlimited liability towards their collective debts and legal consequences. This means that their own assets are liable for attachment for meeting the firm’s debts and liabilities. And limited liability partnerships (LLP) solves this problem.

The Contract Act 1872 Notes Click Here.

An LLP has all basic features of a regular partnership firm, except that of same legal entity status and unlimited liability of partners. Consequently, limited liability partnerships have legal existence and identity separate from that of its partners. Furthermore, its partners have limited liabilities.

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Definition of LLP.

The Parliament of India passed the Limited Liability Partnership Act in 2008 to govern LLP businesses in India. According to Section 2 of this law, an LLP is a partnership registered under the Act. Further, an LLP agreement means a written agreement either between an LLP’s partners or between the LLP itself and its partners. This agreement defines the rights, liabilities, duties, and powers of the partners.

Since the Limited Liability Partnership Act, 2008 specifically governs limited liability partnerships in India, the provisions of the Indian Partnership Act, 1932 are not applicable to LLPs. They only apply to traditional partnership firms.

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A limited liability partnership contains the following peculiar features:.

1. Separate legal entity.

Unlike regular partnership firms, limited liability partnerships are treated as separate legal entities. This means that LLPs can own assets and incur liabilities in their own names. They can also enter into contracts and sue and be sued in their own names.

2. Limited liability of partners.

The liabilities of partners of an LLP are separate and limited. Their personal assets will not liable to attachment in case the LLP is winding up or suffering certain legal consequences of repayment of debt.

Partners’ liabilities, however, can become unlimited in cases of offenses like fraud, the commission of an offense, or any other wrongful and illegal act.

3. Sharing of profits.

All partners of limited liability partnerships share profits of business just as partners of regular firms. They are, however, free to decide the ratio in which they will share profits.

4. Partners of LLPs.

Partners of a limited liability partnership can be either natural persons, i.e. individuals, or even body corporates. Furthermore, an individual cannot be a partner if he suffers from unsoundness of mind or he is insolvent.

LLPs must have a minimum of two partners at all times. Also, the maximum number of partners is unlimited, while it is restricted to 50 for regular partnership firms. If at any time, the number of partners in an LLP becomes less than two, and the sole partner carries on business for more than six months under such circumstances, his liability towards the firm’s business will become unlimited.
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The Sale of Goods Act 1932 Notes Click Here.