LIMITED LIABILITY PARTNERSHIP
A need has been felt to create a business form that would combine the flexibility of a partnership firm and the advantages of a company having limited liability.
A limited liability partnership is a new form of legal business entity with limited liability.
In an LLP, all partners have a form of liability for each individual's protection within the partnership, similar to that of the shareholders of a corporation.
LLP is more favorable for businesses where all investors wish to take an active role in management.
LLP allows its members the flexibility of organizing their internal management on the basis of a mutually arrived agreement. It is useful for smal and medium enterprises in general and also for the service sectors.
In foreign countries, LLPs are the regular form of business especially for the service industrie or for activities in which professionals are engaged.
An LLP is to some extent similar to a partnership business, apart from the fact that individual members have limited liabilities to any debts involved, compared to the usual partnership business.
IMPORTANT FEATURES OF LLP
The LLP is an alternative corporate business vehicle that would give the benefits of limited liability but would allow its members the flexibility of organizing their internal structure as a partnership based on an agreement.
While the LLP is 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. Further, no partner would be liable on account of the independent or un-authorized actions of other partners, thus allowing individual partners to be shielded from joint liability created by another partner's wrongful business decisions or misconduct.
LLP is a corporate body as well as legal entity separate from its partners. It has perpetual succession.
There is no limit related to number of partners whereas in a partnership firm the maximum number of partners cannot be more than 20.
It has the provision of mergers, amalgamations, winding up and dissolution.
One partner is not liable for misconduct or negligence of the other partner(s).