Features of limited liability partnership

and its comparison with corporations

Brief overview of key features of limited liability partnerships and comparison with corporations
 A Limited Liability Partnership (LLP) is a hybrid business
form in India that combines features of a partnership and a
corporation. LLPs allow partners to have limited liability
like shareholders in a company but also provide flexibility
in ownership and management like a traditional
partnership.
 Legal Framework

Formation Management Liabilities

The LLP Act 2008 governs the The Act covers management LLPs have separate legal entity
formation of LLPs in India. aspects like LLP agreements, status. Partner liability is limited
Minimum 2 partners needed. rights and duties of partners. to capital contribution.

Conversions Investigations
Provisions for conversion of existing entities like Pvt Central government can investigate affairs of an LLP
Ltd companies into LLPs. for f raudulent activities.
 Liability

Separate Legal Entity Limited Liability No Joint Liability

An LLP is a separate legal entity The liability of partners is limited Partners are not liable for the
f rom its partners. The LLP is to their contribution or separate acts or omissions of
liable for its own debts and investment in the LLP. other partners.
obligations.

Fraud Exception Creditor Recourse

If f raud is committed by a partner, only that partner Creditors can take action against the LLP but not
is accountable, not other partners. individual partners.
 Features of an LLP

Hybrid form No limit on partners

An LLP is a hybrid between a company and a There is no maximum limit on the number of
partnership firm partners

Separate legal entity Profit motive

An LLP is a separate legal entity from its partners An LLP is formed for business and profit making
purposes

Perpetual succession
An LLP continues to exist regardless of changes in its LLP agreement
partners The LLP agreement governs the roles,
responsibilities and rights of the partners

Minimum 2 partners
An LLP must have at least 2 partners Flexibility in capital and profit
sharing
Partners have flexibility in capital contribution and
profit/loss sharing ratio
 Comparison with Companies

Limited Liability No Share Capital Less Compliance

LLPs provide benefits of limited Unlike companies, LLPs have no LLPs have less compliance
liability like companies but concept of shares and share requirements compared to
flexibility like partnership capital companies

Mutual Agreement Separate Management

The LLP agreement provides flexibility to partners in In a company, the management is separate f rom
deciding their roles, responsibilities and profit/loss shareholders and handled by the board of directors
sharing ratios
 Comparison with Partnerships

Flexibility in LLP Partnership deed Limited liability in LLP

agreement
LLP agreement allows partners
to customize profit sharing,
admission/retirement of
partners, rights and duties.
inflexible
Partnership deed provides
limited flexibility as key aspects
are governed by Partnership
Act.
In an LLP, liability of partners is
limited to their agreed
contribution.

Unlimited liability in partnerships Creditor recourse in partnerships

In partnerships, liability of partners is unlimited and Creditors can target personal assets of any partner
joint. to recover debts.
THANKS!