The Limited Liability Partnership Act, 2008

The Limited Liability Partnership Act, 2008

The Limited Liability Partnership Act, 2008 was enacted by the Parliament of India to introduce and legally sanction the concept of LLP in India. This legal framework was enacted to provide a new form of business organization known as a Limited Liability Partnership. The LLP structure combines elements of a traditional partnership and a company with limited liability.  Unlike the general partnerships in India, LLP is a body corporate and legal entity separate from its partners, have perpetual succession and any change in the partners of an LLP shall not affect the existence, rights or liabilities of the LLP.

LLP is a corporate business vehicle that enables professional expertise and entrepreneurial initiative to combine and operate in flexible, innovative and efficient manner, as a hybrid of companies & partnerships providing benefits of limited liability while allowing its members the flexibility for organizing their internal structure as a partnership. Some of key characteristics of LLP are:

Ø Separate Legal Entity- Continue its existence irrespective of changes in partners,

Ø LLP itself can enter into contracts and hold properties,

Ø Partners' Liability limited to the agreed contribution,

Ø Professional & Non-professional (Businessmen), both can set up LLP.

Some key provisions of LLP Act :

1.  Formation of LLP (Sections 7-11): The Act outlines the procedure for the formation of an LLP, including the requirements for partners, name reservation, and the filing of incorporation documents.

2.    Nature of LLP (Section 3): An LLP is a separate legal entity, distinct from its partners. The liability of partners is limited to their agreed contribution to the LLP, and the personal assets of partners are generally protected.

3. Partnership Agreement (Section 23): The LLP agreement is a crucial document that governs the mutual rights and duties of partners and the conduct of LLP's business. The agreement can be entered into between the partners or between the LLP and its partners.

4.    Designated Partners (Sections 7, 8, 9): Every LLP is required to have at least two designated partners who are individuals, and at least one of them must be a resident in India. Designated partners are responsible for regulatory compliance.

5.    Contribution and Financial Disclosures: Partners contribute to the LLP, and the Act specifies the rules regarding contributions and financial disclosures.

6.    Obligations of LLP (Sections 17-21): The Act sets out various obligations of LLPs, including the maintenance of books of accounts, audit requirements, and filing of annual returns.

7.    Conversion of Firm into LLP (Section 55): The Act allows for the conversion of existing firms into LLPs, subject to certain conditions.

8.    Conversion of Private Company or Unlisted Public Company into LLP (Sections 56-57): The Act provides provisions for the conversion of a private company or an unlisted public company into an LLP.

9. Winding up and Dissolution (Sections 63-64): The Act specifies the procedures for winding up an LLP, either voluntarily or by the National Company Law Tribunal (NCLT).

10. Penalties (Sections 72-73): The Act includes provisions for penalties in case of non-compliance with various provisions.

11. National Company Law Tribunal (NCLT) and National Company Law Appellate Tribunal (NCLAT): Similar to the Companies Act, the LLP Act also involves these quasi-judicial bodies for dispute resolution and appellate proceedings.