FAQs On Nature of Limited Liability Partnership (LLP)
MCA has published an FAQ on the nature of a Limited Liability Partnership (LLP) in India. In order to access the published article, please click HERE
Also, Limited Liability Partnership FAQs can be read below
Table of Contents
Concept of (LLP) Limited Liability Partnership
• LLP is an alternative corporate business form that gives the benefits of limited liability of a company and the flexibility of a partnership.
• The LLP can continue its existence irrespective of changes in partners. It is capable of entering into contracts and holding property in its own name.
• The LLP is a separate legal entity, is liable to the full extent of its assets. Still, the liability of the partners is limited to their agreed contribution in the LLP.
• Further, no partner is liable on account of other partners’ independent or unauthorised actions; thus, individual partners are shielded from joint liability created by another partner’s wrongful business decisions or misconduct.
• Mutual rights and duties of the partners within an LLP are governed by an agreement between the partners or between the partners and the LLP as the case may be. The LLP, however, is not relieved of the liability for its other obligations as a separate entity.
Since LLP contains elements of both ‘a corporate structure’ and a partnership firm structure’ LLP is called a hybrid between a company and a partnership.
Structure of an LLP
LLP shall be a body corporate and a legal entity separate from its partners. It will have perpetual succession.
Advantages of LLP form
LLP form is a form of business model which:
(i) is organized and operates based on an agreement.
(ii) provides flexibility without imposing detailed legal and procedural requirements
(iii) enables professional/technical expertise and initiative to combine with financial risk-taking capacity in an innovative and efficient manner
Other countries where this LLP form is available
The LLP structure is available in countries like the United Kingdom, the United States of America, various Gulf countries, Australia and Singapore. On the advice of experts who have studied LLP legislation in various countries, the LLP Act is broadly based on UK LLP Act 2000 and Singapore LLP Act 2005. Both these Acts allow the creation of LLPs in a body corporate form, i.e. as a separate legal entity, separate from its partners/members.
Difference between LLP & “traditional partnership firm.”
• Under “traditional partnership firm”, every partner is liable, jointly with all the other partners and severally for all firm acts done while he is a partner.
Difference between LLP & a Company
• Under the LLP structure, the liability of the partner is limited to his agreed contribution. Further, no partner is liable for the independent or unauthorised acts of other partners, thus allowing individual partners to be shielded from joint liability created by another partner’s wrongful acts or misconduct.
• A basic difference between an LLP and a joint-stock company lies in that the internal governance structure of a company is regulated by statute (i.e. Companies Act, 1956). In contrast, for an LLP, it would be by a contractual agreement between partners.
• The management-ownership divide inherent in a company is not there is a limited liability partnership.
• LLP will have more flexibility as compared to a company.
• LLP will have lesser compliance requirements as compared to a company.
Limited Liability Partnership FAQs as published on the MCA website
Rate of Depreciation as per Companies Act 2013:
Refer Depreciation Rate as per Companies Act
Rate of Depreciation as per Income Tax Act 1961:
