Presented By-Vishal,Sai

Date-April 17,2010
Source- www.pluggd.in, eHOW Blog
Presentation Schema
Meaning

 Origin and Development

 Process for Incorporating a

LLP

 Salient Features of LLP

 Advantages and
Disadvantages of LLP

 Comparative Analysis
 Meaning
A Limited Liability Partnership firm (“LLP”) is a form of
business organisation with each partner’s liability limited to
the contribution made by that partner in relation to the LLP,
except in case of fraud, malpractice, wrongs, etc., in which
case liability that can attach to the relevant partner may be
unlimited liability.

Usually LLPs are persons in the eyes of law and are

incorporated as persons, unlike normal partnership concerns
which are not incorporated as persons in the eyes of law.
The hybrid structure of an LLP, which combines the
organisational flexibility of general partnership and the limited
liability benefits of an incorporated company which is innovative.
 Origin and Development
 1990-2000: In the 1990s, the accountancy firms in the UK campaigned to secure
proportional liability in Partnership firms. This finally led to the passing of the
Limited Liability Partnership Act, in the year 2000.

 2001: The concept of LLPs spread rapidly from 2 states in 1992 to all 51 U.S
jurisdictions by 2001.

 1957: Suggestion to introduce LLP legislation rejected by 7th Law Commission

on Partnership Act, 1932.
•

 1997: Abid Hussain Committee on Small Scale Industries recommended

introduction of LLPs in India.

 2003: Naresh Chandra Committee Report (Regulation of Private Companies and

Partnerships) highlighted the grave need to introduce LLPs in India – suggested
application of LLPs to service Industry.

October 21, 2008: LLP Bill 2008 introduced in Parliament.

October 24, 2008: LLP Bill 2008 passed by the Rajya Sabha.
December 13, 2008: LLP Bill 2008 passed by the Lok Sabha.
January 7, 2009: President’s assent given to the LLP Bill 2008.
January 9, 2009: LLP Act 2008 published in the official gazette.
  Process for Incorporating a LLP
1 ●
Decide on the Partners and the Designated Partners.

Obtain Designated Partner Identification Number (DPIN) and a

2
●

digital signature certificate.

3 ●
Decide on the name of the LLP and check whether it is available.

4 ●
Draft the LLP agreement.

File the LLP Agreement, incorporation documents and obtain the

5
●

Certificate of Incorporation.
 Salient Features of LLP
The parliament on 12.12.2008 passed the limited liability partnership Act 2008 and the
rules under the act had been framed and are made effective from 01.04.2009. The salient
features of the act and rules are as under:

• The LLP will be 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.

• The bill is for the benefit of any enterprise which fulfills the requirements of the Act.
There can also be a foreign LLP.

• Every person having the capacity to contract according to the law of the land can be a
member of LLP.

• No partner will be liable for the independent or unauthorized actions of other partners
there by shielding the partners from the joint liability created by the other partners'
wrongful business decisions or misconduct.
•Obligation to maintain annual accounts reflecting true and fair view of its state of affairs.

•LLP shall be a corporate body and a legal entity separate from its partners.
It has a perpetual succession. Indian Partnership Act shall not be applicable
to LLP and the minimum number of partners of a LLP is two and there is
no upper limit to the number of partners.

•LLP can also take actions like mergers/amalgamations. Similarly there are provisions for
winding up and dissolution.

•Every LLP should have two "Designated partners" at least one of whom should be a resident
Indian.

•An intending Unlimited Liability Partnership firm seeking to convert itself into a LLP is required
to apply to the Registrar as per form 17 which should be accompanied by written consent
from all creditors and all the assets and liabilities would be transferred to the new LLP (If LLP
is accepted)  

•The Central government by a notification in the Gazette can apply any provisions of the
Companies Act to LLP either fully or with certain modifications.

 
 Advantages and Disadvantages of LLP
Advantages
• A LLP is indeed advantageous because of comparatively lower cost of
formation.

• Lesser compliance requirements, easy to manage and run and also easy to
wind-up and dissolve.

• No requirement of minimum capital contributions.

• Partners are not liable for the acts of the other partners.

• Importantly no minimum alternate tax (as of date).

Disadvantages
• LLP cannot raise money from the public.

• LLP may be unlimited in case of fraud, malpractice, wrongs, etc.

 Comparative Analysis
Limited Liability Partnership
1 Incorporation procedure
relatively simple and
expeditious
2 Flexible management structure
– Partners are entitled to
participate in management
3 Flexible Capital Structure
4 No provision relating to
redressal in case of oppression
5 Limited statutory compliance as
compared to Companies
Incorporated Company
Incorporation procedure more
complex than LLP
Management structure usually
complex –Shareholders do not
ordinarily participate in day to day
management
Capital structure less flexible than
LLP
Elaborate provision relating to
redressal in case of oppression and
mismanagement
Complex statutory compliance
requirements
 Limited Liability Partnership
1 Liability of Partners limited to
contribution
2 Partners not jointly liable for acts of
other partners
3 LLP is a body corporate having
perpetual succession
4 LLP is a separate legal entity
5 Incorporation of LLP is mandatory
6 LLP required to make financial
disclosures
7 An LLP can have more than 20
partners
8 Filing of accounts, statement of
solvency and annual return are
mandatory
General Partnership
Liability of Partners unlimited
Partners jointly and severally liable
Partnership firms are neither body
corporates nor do they have
perpetual succession
A general partnership is not an entity
legally separate from its members
Registration of partnership is not
mandatory
General Partnership not required to make financial
disclosures
A general partnership cannot have
more than 20 partners
Filing of accounts, statement of
solvency and annual return are not
required
MERCI……