Limited Liability Partnership concept in India is introduced
by way of Limited Liability Partnership Act, 2008.
It combines the advantages of both the Company and
Partnership into one.
In an LLP one partner is not responsible or liable for
another partner's misconduct or negligence.
In an LLP, all partners have limited liability.
The partners have the right to manage the business
directly.
An LLP also limits the personal liability of a partner for
the errors, omissions of the LLP's employees or other agents.
Limited Liability Partnership is managed as per the LLP
Agreement, however in the absence of such agreement the LLP would be governed
by the framework provided in Schedule 1 of Limited Liability Partnership Act,
2008 which describes the matters relating to mutual rights and duties of
partners of the LLP and of the limited liability partnership and its partners.
LLP has a separate legal entity, liable to the full extent
of its assets, the liability of the partners would be limited to their agreed
contribution in the LLP.
Comparing LLP & Partnership Firms
1. Registration: registration of Partnership firm is
optional but LLP is compulsory
2. Creation: Partnership Firm is created by Contract but LLP
is created by Law
3. Separate Entity: Partners in Partnership firm does not
have separate legal entity but in LLP partners have separate liability.
4. Perpetual succession: Partnership firm does not have
Perpetual Succession but in LLP partners may come and go LLP status remains as
it is.
5. Common Seal: In partnership firm Common seal is not
required but in case of LLP common seal is required.
6. Sue Third party: Unregistered Partnership firms cannot
sue third parties whereas LLP can.
7. Deed: In partnership firms, Partnership deed is executed
whereas in LLP, LLP Agreement is executed.
8. Annual Filing: In partnership firms Annual filing is not
required but in case of LLP, Annual filing of Balance Sheet and Annual Return
needs to be filed.
Procedure of incorporating Limited Liability Partnership:
1. Obtaining Director Identification Number (DIN)
2. Obtaining Digital Signature Certificate (DSC)
3. Check Name Availability
4. Drafting LLP Agreement
5. Filing of Forms
Conversion of Partnership Firms/Private Limited/Public
Limited Companies into Limited Liability Partnership:
Its not necessary that a new LLP should be formed. An
existing Partnership firm, Private Limited and Public Limited ompany can also
convert itself into LLP.
LLP Agreement Meaning:
The mutual rights and duties of partners and those of the
LLP and its partners shall be governed by the agreement. This Agreement is
known as “LLP Agreement”.
As per provisions of the LLP Act, in the absence of
agreement as to any matter, 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.
Contribution of Partners in LLP
Partner’s contribution may consist of both
tangible or intangible property. The monetary
value of contribution of each partner shall be accounted
for and disclosed in the accounts of the LLP.
Annual Filing of Limited Liability Partnership
Two forms needs to be filed under Annual Filing i.e. Form 8
and Form 11
Form 8 (Statement of Account & Solvency) and LLP Form 11
(Annual Return) annually.
The ‘Annual Return’ is required to be filed within 60 days
of close of the financial year and ‘Statement of Accounts & Solvency’ shall
be filed within 30 days from the end of six months of the financial year to
which it relates.
Audit of Accounts of Limited Liability Partnership
1. If Turnover is more than 40 Lacs
OR
2. Contribution is more than 25 Lacs
