Limited Liability Partnership
Limited Liability Partnership
Limited Liability Partnership
Introduction
An LLP is a business structure that came into being by the passing of the LLP Act,
2008 and the notification of the LLP Rules, 2009. Section 3 of the LLP act declares
an LLP as a body corporate formed and incorporated under the Act and is a legal
entity separate from its partners.
LLPs are a flexible legal and tax entity that allows partners to benefit
from economies of scale by working together while also reducing their liability for
the actions of other partners.
Most LLPs are created and managed by a group of professionals who have a lot of
experience and clients between them. By pooling resources, the partners lower
the costs of doing business while increasing the LLP’s capacity for growth. They
can share office space, employees, and so on. Most important, reducing costs
allows the partners to realize more profits from their activities than they could
individually.
Features of an LLP
An LLP is a body corporate and legal entity separate from its partners. It has
perpetual succession.
Being the separate legislation (i.e. LLP Act, 2008), the provisions of Indian
Partnership Act, 1932 are not applicable to an LLP and it is regulated by the
contractual agreement between the partners.
Every Limited Liability Partnership shall use the words “Limited Liability
Partnership” or its acronym “LLP” as the last words of its name.
It contains elements of both ‘a corporate structure’ as well as ‘a partnership
firm structure’.
Every LLP shall have at least two designated partners being individuals, at
least one of them being resident in India and all the partners shall be the
agent of the Limited Liability Partnership but not of other partners.
LLP agreement is not mandatory but in the absence of LLP agreement,
mutual rights and liabilities of partners shall be determined as provided
under Schedule I to the LLP Act.
Definition LLP is a business form that offers A partnership is a form of business where two
the combined benefits of a or more individuals agree to carry business and
partnership and a company share profit loss mutually
Legal Status Legal Entity Partners are collectively known as a firm, but it
has no separate legal entity
Naming of Firm Must suffix LLP after the name of Can be any name
the firm
Other Income 30 %
Surcharge – 12 % (where taxable income including capital gain exceeds Rs.
1 crore). It is subject to Marginal relief.
Health and Education Cess – 4 % (on the amount of income tax and
surcharge)
Alternative Minimum Tax – Tax payable by firm can’t be less than 9% (Plus
Cess) of adjusted total income as per Sec. 115 JC.
LLP Audit
As per LLP Act, 2008 provides every LLP having turnover exceeds Rs. 40
Lakhs or whose Capital contribution exceeds Rs. 25 Lakhs are required to
annually get their accounts audited by a chartered accountant. As per
Income Tax Act, 1961 provides every LLP having turnover exceeds Rs. 100
Lakhs are required to annually get their accounts audited by a chartered
accountant
Any act of the partner without the consent of other partners, can bind the
LLP.
Under some cases, liability may extend to personal assets of the partners.
An LLP are not allowed to raise money from Public.
Because of the hybrid form of the business, it is required to comply with
various rules & regulations and legal formalities.
It is very difficult to wind up the business in case of exigency as there are a
lot of legal compliances under Limited Liability Partnership (Winding Up and
Dissolution) Rules and it is very lengthy and expensive procedure.