The Limited Liability Partnership (abbreviated as LLP) has elements of partnerships and corporations. It is a partnership in which all partners are limited partners. In an LLP one partner is not responsible or liable for another partner's misconduct or negligence. This is an important difference from that of a limited partnership. In an LLP, all partners have a form of limited liability for each individual's protection within the partnership, similar to that of the shareholders of a corporation. However, unlike corporate shareholders, the partners have the right to manage the business directly. As opposed to that, corporate shareholders have to elect a board of directors under the laws of various state charters. The board organizes itself (also under the laws of the various state charters) and hires corporate officers who then have as "corporate" individuals the legal responsibility to manage the corporation in the corporation's best interest. An LLP also contains a different level of tax liability than a corporation.
Limited liability partnerships are distinct from limited partnerships, in that limited liability is granted to all partners, not to a subset of non-managing "limited partners." As a result the LLP is more suited for businesses where all investors wish to take an active role in management.
The Limited Liability Partnership Act 2008 has been notified in the official Gazette of India on Januay 9, 2009. ] But the relevant rules have not been notified as yet and are in preparation so the Act has not been fully implemented. The Minister of Corporate Affairs is striving hard to get the first LLP in India be incorporated on 1st April 2009. The Parliament of India has passed the Limited Liability Partnership (LLP) Bill 2008. Lok Sabha (Lower House) granted its assent to the Bill on December 12, 2008 which was earlier passed by the Rajya Sabha (Upper House). The salient features of the LLP Act, 2008 are as under:-
1. The LLP has an alternative corporate business vehicle that would give the benefits of limited liability but allows its members the flexibility of organizing their internal structure as a partnership based on an agreement.
2. The LLP Act does not restrict the benefit of LLP structure to certain classes of professionals only and would be available for use by any enterprise which fulfills the requirements of the Act.
3. While the 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. 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.
4. LLP shall be a body corporate and a legal entity separate from its partners. It will have perpetual succession. Indian Partnership Act, 1932 shall not be applicable to LLPs and there shall not be any upper limit on number of partners in an LLP unlike an ordinary partnership firm where the maximum number of partners can not exceed 20.
5. The taxation of LLPs shall be addressed in the Income Tax Act, 1961 which regulates taxation of all form of entities.
6. Provisions have been made for corporate actions like mergers, amalgamations etc.
7. While enabling provisions in respect of winding up and dissolutions of LLPs have been made, detailed provisions in this regard would be provided by way of rules under the Act.
8. The Act also provides for conversion of existing partnership firm, private limited company and unlisted public company into a LLP.
9. Nothing Contained in the Partnership Act 1932 shall effect an LLP.
10. The Registrar of Companies (Roc) shall register and control LLPs also.
11. The governance of LLPs shall be in electronic mode in the successful model of the present
(Extracted from Ministry of Corporate Affairs Portal)
