Limited Liability Partnership

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A partnership which gives limited liabilities to some or all partners depending on the jurisdiction is called Limited Liability partnership (LLP). If one or more of the partner misconducts then the others are not responsible for his/her acts. LLP is also called a hybrid between the company and the partnership.

The following are the benefits of the LLP:

No requirement of minimum contribution
No limit on owners of the business
Lower registration cost
No requirement of compulsory Audit
Dividend Distribution Tax (DDT) not applicable
Flexible Roles for Partners

Frequently Asked Question

What is the difference between LLP and a Partnership Firm?

An LLP must be registered under the LLP Act to operate its business. However, the registration of a partnership firm is voluntary under the Partnership Act, 1932. The liability of each partner is limited to the contribution made by the partner in an LLP. But in a partnership firm, all partners are personally liable for the loss/debts of the firm. The LLP has a separate legal entity, i.e. it can buy property, sue and be sued in its name. Partnership firms cannot buy a property or sue anyone in the partnership firm’s name. It has to be in the name of the authorised partner as the partnership firm does not have a separate legal entity.

Does LLP require MOA and AOA?

No, the Memorandum of Association (MOA) and the Articles of Association (AOA) are important documents of a company registered under the Companies Act, 2013. The LLP agreement governs the LLP and not the MOA and AOA. Thus, an LLP does not have to draft the MOA and AOA. It has to draft the LLP agreement.

Should directors be appointed to an LLP?

No, there are no directors in an LLP. An LLP does not have to appoint directors or have a board of directors. The partners govern the business of an LLP. The partners take decisions regarding the working and business of the LLP. Thus, an LLP needs to have a minimum of two partners at all times.

What is DPIN?

The trademark contains four functions which are mentioned below: Designated Partner Identification Number (DPIN) is a unique number given by the MCA to the designated partner of an LLP. The DPIN is similar to the Director Identification Number (DIN) of a company director. DPIN can be obtained for any person when registering an LLP, or a person can later apply for a DPIN to become a designated partner of an existing LLP.

What is the eligibility to be appointed as a designated partner in an LLP?

Any individual partner can become a designated partner in an LLP by consenting to it and in accordance with the LLP agreement. A body corporate cannot be a designated partner. All partners can be designated partners in an LLP if such a provision is provided in the LLP agreement.

Who can be partners in an LLP?

Any individual or body corporate can be a partner in an LLP. However, minors, persons of unsound mind and an undischarged insolvent cannot be partners in an LLP.

How many designated partners are required in an LLP?

Every LLP must have at least two designated partners, and at least one of them should be a resident in India. If all partners in an LLP are body corporates, then at least two individual nominees of such body corporates should act as designated partners. Any partner can be a designated partner in accordance with the LLP agreement.

What if the partner’s number in an LLP reduces to one?

If the number of partners of an LLP reduces to one at any time, the single partner can carry on the business of the LLP for six months. After six months, if the LLP still has only one partner and that partner carries on a business of the LLP, the single partner will be liable personally for the obligations of the LLP. The National Company Law Tribunal can also wind up the LLP when the number of partners of the LLP is reduced below two for more than six months.

Can an existing partnership firm be converted to LLP?

Yes, an existing partnership firm can be converted into LLP by complying with the Provisions of clause 58 and Schedule II of the LLP Act. Form 17 needs to be filed along with Form 2 for such conversion and incorporation of LLP.