UNIVERSITY INSTITUTE OF LEGAL

STUDIES
PANJAB UNIVERSITY, CHANDIGARH
A PROJECT REPORT IS SUBMITTED AS A CURRICULUM OF “B.COM
LL.B(Hons.)” IN THE SUBJECT OF “BUSINESS LAWS” FOR 7TH SEMESTER

PROJECT REPORT

TOPIC:- MEANING AND NATURE OF LIMITED

LIABILITY PARTNERSHIP

SUBMITTED BY:- SUBMITTED BY:-

M. PREETI BANSAL GURKANWAL
KAUR
UILS,PU B.COM LL.B(HONS.)
CHANDIGARH ROLL NO:- 232/20
SECTION:-D
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SEMESTER:- 7TH
 ACKNOWLEDGEMENT
I would like to thank my subject teacher Professor “M. PREETI BANSAL”
who gave me this golden opportunity to do this project on the topic
MEANING AND NATURE IF LIMITED LIABILITY PARTNERSHIP.
He conveyed all the important instructions time to time to us and provided us
with all the information required for the completion of the project.
I would also like to thank Panjab university for offering this project report in
on syllabus. I must mention my hearty gratitude towards my family, faculties
and friends who supported me to go ahead with the project.
I owe my regards to the entire faculty of the Department of Legal Studies, from
where I have learnt the basics of Law and whose informal discussions,
intellectual support helped me in the entire duration of this work.

GURKANWAL KAUR
B.COM LL.B(HONS.)
ROLL NO.232/20
SECTION:-D
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 INDEX

 INTRODUCTION 4

 MEANING OF LLP 4

 NATURE OF LLP 5

 FEATURES OF LLP 5-6

 LLP VS. TRADITIONAL PARTNERSHIP 6-7

 DESIGNATED PARTNERS IN LLP 8-10

 CONCLUSION 10

 BIBLIOGRAPHY 11

INTRODUCTION
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Up until a few decades, businesses were limited to being either a company, partnership or sole
proprietorship. Each kind of organization had its own advantages and disadvantages; for instance,
Partnership and proprietorship were easier to form and operate but did not have a limited liability which
was a prominent feature of a company. The development in the way businesses’ function has resulted in
the formation of a Limited Liability Partnership (LLP) which could be termed as a fusion between the
benefits of a company and a partnership. In layman’s terms, it can be understood as an amalgamation of a
company and partnership due to its business model which allows the organisation to reap the benefits of
limited liability to the partners at relatively low costs compared to traditional models. This form of
organisation is suitable for small and medium-size businesses.1

MEANING OF LIMITED LIABILITY PARTNERSHIP

A Limited liability Partnership is a new form of legal business entity with limited liability. Its is an
alternative corporate business vehicle that not only gives the benefit of limited liability at low compliance
cost but allows its partners the flexibility of organizing their internal structure as a traditional partnership.
The limited liability firm is a separate legal entity and while the limited liability partnership will be liable
for the full extent of its assets, the liability of the partners will be limited. In layman’s terms, it can be
understood as an amalgamation of a company and partnership due to its business model which allows the
organisation to reap the benefits of limited liability to the partners at relatively low costs compared to
traditional models. This form of organisation is suitable for small and medium-size businesses. 2

The Parliament of India passed the Limited Liability Partnership Act in 2008 to govern LLP businesses in
India. According to Section 2 of this law, an LLP is a partnership registered under the Act. Further, an
LLP agreement means a written agreement either between an LLP’s partners or between the LLP itself
and its partners. This agreement defines the rights, liabilities, duties, and powers of the partners.

LIMITED LIABILITY
PARTNERSHIP

LLP itself will be

New form of legal
business entity with liable for the full
limited liability extent of its Assets
Allows flexibility to
partners organising
Alternative Liability and
their internal
corporate business partners will be
NATURE OFvehicle
LLP limited

According to section 3 of the LLP Act, 2008, LLP is a body corporate having perpetual succession and a
legal entity separate from its partners. Any change in the partners of such partnership shall not affect its
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1
Vihanka Narsimhan, all you need to know about a LLP, https://blogipleaders.in
2
Supra note 1 at 4
liabilities. LLP is more akin to a company than to a partnership. Basic nature of a LLP can be summarised
as under:

(1) It is a body corporate formed and incorporated under LLP Act, 2008.
(2) It is a separate legal entity distinct from its partners.
(a) It is a juristic person.
(b) It can sue and be sued in its own name.
(c) It can hold assets (movable and immovable) in its own name.
(d) It can act as a trustee if the LLP Agreement so provides.
(e) However, it is not a citizen so as to claim fundamental rights granted to citizens.
(3) It shall have perpetual succession.
(a) Partners may come and go, but the LLP would continue until it is dissolved/wound up
as per law or as provided in the LLP Agreement.
(b) Any change in the partners of a LLP shall not affect the existence, rights or liabilities

of the LLP. According to section 4 of LLP Act the provisions of the Indian

Partnership Act, 19322 shall not apply to LLP.

(4) According to section 4 of LLP Act the provisions of the Indian Partnership Act, 19322

shall not apply to LLP.

FEATURES OF LLP

The salient features of the LLP under the LLP Act, 20083, are as follows:

1. A BODY CORPORATE: Section 2(1)(d) of the LLP Act, 2008 provides that an LLP is a body
corporate formed and incorporated under this Act and is a legal entity separate from that of its partners
and shall have perpetual succession. Therefore, any change in the partners of a LLP shall not affect the
existence, rights or liabilities of the LLP. Section 3 of LLP Act provides that an LLP is a body corporate
formed and incorporated under this Act and is a legal entity separate from that of its partners.

2. PERPETUAL SUCCESSION: The LLP can continue its existence irrespective of changes in
partners. Death, insanity, retirement or insolvency of partners has no impact on the existence of LLP. It is
capable of entering into contracts and holding property in its own name.

3. SEPARATE LEGAL ENTITY: The LLP is a separate legal entity, is liable to the full extent of
its assets but liability of the partners is limited to their agreed contribution in the LLP. In other words,
creditors of LLP shall be the creditors of LLP alone.

4. LLP Agreement: Mutual rights and duties of the partners within an LLP are governed by an
agreement between the partners. The LLP Act, 2008 provides flexibility to partner to devise the
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3
The limited liability Partnership Act,2008, No.6, Acts of parliament,(India)
agreement as per their choice. In the absence of any such agreement, the mutual rights and duties shall be
governed by the provisions of the LLP Act, 2008.

5. ARTIFICIAL LEGAL PERSON: An LLP is an artificial legal person because it is created by a

legal process and is clothed with all rights of an individual. It c11 an do everything which any natural
person can do, except of course that, it cannot be sent to jail, cannot take an oath, cannot marry or get
divorce nor can it practice a learned profession like CA or Medicine. An LLP is invisible, intangible,
immortal (it can be dissolved by law alone) but not fictitious because it really exists.

6. COMMON SEAL: An LLP being an artificial person can act through its partners and designated
partners. LLP may have a common seal, if it decides to have one [Section 14(c)]. Thus, it is not
mandatory for an LLP to have a common seal. It shall remain under the custody of some responsible
official and it shall be affixed in the presence of at least 2 designated partners of the LLP.

7. LIMITED LIABILITY: Every partner of a LLP is, for the purpose of the business of LLP, the
agent of the LLP, but not of other partners (Section 26). The liability of the partners will be limited to
their agreed contribution in the LLP. Such contribution may be of tangible or intangible nature or both.

8. MANAGEMENT OF BUSINESS: The partners in the LLP are entitled to manage the business
of LLP. But only the designated partners are responsible for legal compliances.

9. MINIMUM AND MAXIMUM NUMBER OF PARTNERS : Every LLP shall have least
two partners and shall also have at least 2 individuals as designated partners, of whom at least one shall
be resident in India. There is no maximum limit on the partners in LLP.

10. BUSINESS FOR PROFIT ONLY: The essential requirement for forming LLP is carrying on
a lawful business with a view to earn profit. Thus, LLP cannot be formed for charitable or non-economic
purpose.

LIMITED LIABILITY PARTNERSHIP VS. TRADITIONAL PARTNERSHIP

Sr.no. Basis Limited Liability Partnership Partnership

1. Governing LLP is governed by the Limited Partnership firm is governed
Law Liability Partnership Act,2008 by the Indian Partnership
Act,1932.
2. Creation LLP is created by a legal process Partnership firm is created by
called Registration. an agreement between the
partners.
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3. Registratio Registration is mandatory under Registration is voluntary
n LLP. under the partnership firm.

4. Foreign A foreign national can become a A foreign national cannot

National partner in LLP. become a partner in a
partnership firm.
5. Minor Minor cannot be admitted to Minor can be admitted to the
benefits of LLP. benefits of partnership.

6. Common It may have common seal. It cannot have a common seal.

seal

7. Designated In LLP there must be at least two There is no provision of

Partners designated partners. designated partners in
partnership.
8. Body LLP has a body corporate. Partnership is not a body
Corporate corporate.

9. Liability Liability of each partner is Liability of each partner is

limited. unlimited.

10. Perpetual There is a perpetual succession There is no perpetual

Succession LLP. succession in partnership firm.

DESIGNATED PARTNERS IN A LIMITED LIABILITY PARTNERSHIP

Introduction

Designated partners are a concept introduces by the limited liability partnership act, 2008.
Designated partners are like directors of private limited company, A designated partners in an
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LLP when compared to director of a company enjoy more rights and privileges.
 Who can be designated Partners in a limited liability Partnership?

 Minimum 2 designated Partners in LLP (Individuals)

According to section 7(1) of the LLP Act, 2008, Designated partners can only be individuals.
Among the members of a Limited Liability Partnership, two or more partners can be
designated as a Designated Partner. In all LLP, at least one of the Designated Partner must be
an Indian Resident. Indian Resident means a person who has stayed in India for a period of
not less than 182 days.

 Designated Partners when all partners in LLP are body corporates

In case of LLP in which all the partners are body corporates, them nominees of such body
corporates shall act as designated partners.

 Designated Partners when partners in LLP are body corporates and one or
more partners are individuals
In case of LLP, in which one or more partners are individuals and body corporate, then at
least two individuals who are partners of such LLP or nominees of such body corporates shall
act as designated partners.4
Who can’t be a Designated Partner?
The persons listed below do not qualify to be a designated partner:
o An undischarged insolvent.
o A person who was declared involvement in the preceding five years.

o A person who has withheld payments to his creditors at any point of time in the
preceding five years of time, and has not made a composition with the creditors.
o A person who has been imprisoned for any immoral acts, and where the period of the
sentence was at-least 6 months.
o Minors below the age of 18 years.

However, the Central Government is empowered with the rights to annul the disqualification of a
person.
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The limited liability partnership Act,2008
LIABILITIES OF A DESIGNATED PARTNER

o COMPLY ALL THE PROVISIONS OF LLP ACT

The designated Partners as provided in section 8 are directly responsible for the compliances of all
provisions provided under LLP Act, and the provisions specified in LLP agreement.
They are responsible for doing all acts, matters and things as required to be done by LLP in
respect of compliances of the provisions of the LLP Act.

o LIABLE TO ALL PENALTIES

A designated partner shall be liable to al penalties imposed on al LLP for any contravention of
those provisions. Therefore, designated Partners shall be solely responsible for all compliances
and penalties under the LLP Act, 2008.

APPOINTMENT OF A DESIGNATED PARTNER

 PRIOR CONDITION

According to section 7(3), an individual shall not become a designated partner in any LLP
unless he has given his prior consent to act as such to LLP in such form and manner as may
be prescribed.

Every LLP shall file with the registrar the particulars of every individual who has given his
consent to act as designated partner within 30 days of his appointment.

 APPOINTMENT

1. Incorporation Document:-If the incorporation document states that who shall be

designated partners then such persons shall be designated partners. If the incorporation
document states that each of the partners from time to time of LLP is to be designated
partner then every such partner shall be a designated partner.
2. LLP Agreement: Any Partner may become a designated partner by or in accordance
with the LLP agreement and a partner may cease to be a designated partner in
accordance with LLP Agreement5.
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The limited liability Partnership Act,2008
CHANGES IN DESIGNATED PARTNERS
In case a vacancy arises on the position of designated partners for any reason, then LLP may appoint a
designated partner within 30 days of a vacancy. If no designated partner is appointed or if at any time
there is only one designated partner, each partner shall be deemed to be a designated partner.6

CONCLUSION:-

The concept of LLP is a combination of Partnership which is beneficial for both small and medium size
firms. Each partner is responsible for his own deeds or negligence. As also it is termed as an “alternative
corporate business vehicle” as the functioning is same as any other general partnership but it comes with a
special provision of the limited liability rule. Over time it has become evident that LLPs are certainly very
profitable for business purposes as it is the union of the advantages of both a joint-stock company and a
traditional partnership. It eliminates risks and encourages people to enter partnerships, which in turn helps
in the creation of new business ventures which are both economically and socially progressive. In a
nutshell, one can say that the versatility of the concept has proved to be one of the major factors which
have made it popular all around the world.

BIBLIOGRAPHY
BARE ACTS:

 The Limited Liability Partnership Act, 2008

 The Indian Partnership Act, 1932
 The Companies Act, 1956
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SECONDARY SOURCES
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6
IBID
  AVTAR SINGH, INTRODUCTION TO LAW OF PARTNERSHIP (EASTERN
BOOK COMPANY, 2018 EDITION)
 RK BANGIA, THE INDIAN PARTNERHIP ACT(ALLAHABAD LAW AGENCY,
2017 EDITION (REPRINT 2019)
 PREVIOUS YEARS PROJECTS

WEBLIOGRAPHY

 https://www.taxmann.com/

 https://taxguru.in/

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