Limited Liability Partnership (LLP) – All You Need To Know

Introduction

The LLP is termed as Limited Liability Partnership, basically a partnership firm with limited liability on its partners. The regular partnership firm is quite different than that of the LLP. In this article we will see the difference between regular partnership firm and LLP along with some of the important features of LLP. An LLP is a format where partners comes together to form a partnership firm which has legal backing. It is Partnership firm with benefits of company.

What is LLP?

An LLP is the partnership firm regulated by Limited Liability Partnership Act, 2008. The concept of LLP is formed in order to limit the liability of its partners and to conduct of the partners. LLP is an alternative corporate business form that gives the benefits of limited liability of a company and the flexibility of a partnership. The liability of all the partners in any regular partnership firm is unlimited which means that an act of other partners is binding on all the partners. Whereas, in LLP the liability of all partners is limited to the extent of contribution introduced by partners. Since LLP contains elements of both ‘a corporate structure’ as well as ‘a partnership firm structure’ LLP is called a hybrid between a company and a partnership.

Characteristics/Features of LLP

1. It is a separate legal entity
2. The liability of the partners is limited to the extent of the contribution made by them
3. There shall be at least two designated partners one of them must be resident of India.
4. There is no upper limit for numbers of partners in LLP.
5. There is no minimum requirement of capital contribution
6. LLP is regulated by LLP agreement which has to be in accordance with LLP Act, 2008.
7. The compliances of LLP is limited as compared with company.

What is the difference between LLP and traditional partnership firm?

Under “traditional partnership firm”, every partner is liable, jointly with all the other partners and also severally for all acts of the firm done while he is a partner. We can say that liability of each partner is unlimited in traditional partnership firm.

Under Limited Liability Partnership structure, liability of the partner is limited to his agreed contribution. Further, no partner is liable on account of the independent or un-authorized acts of other partners, thus allowing individual partners to be shielded from joint liability created by another partner’s wrongful acts or misconduct.

What is the difference between designated partners and regular partner in LLP?

All the Designated partners (Generally referred as DP) in LLP are responsible to carry out the compliances made compulsory under LLP act, 2008. The conduct of LLP must be in accordance with the LLP act, 2008. Thus, it is the responsibility of designated partners to look after these regular compliances. The regular partners in LLP are not given this responsibility. The regular partners shall act in terms of the LLP deed. All the designated partners in LLP are required to have DPIN.

What is LLP deed or LLP agreement?

An LLP deed is a legal document where the terms and conditions of LLP are articulated which is agreed and signed by all the partners. The contents of LLP deed shall include the particulars of all partners, the registered office of LLP, Business activity of LLP, Contributions introduced by all the partners and the other terms and conditions according to which all the partners are bound to act. After incorporation of an LLP, it is the duty of partners to get this deed registered with MCA by filing Form-3 of LLP. Any changes in the LLP deed must be intimated to ROC by filing Form-3 and From-4 within specified period of time.

Annual Filing of Limited Liability Partnership

Every Limited Liability Partnership is required to comply with annual compliances prescribed by MCA. This compliance includes filing of two forms namely Form 11- Annual Return of LLP and Form 08- The statement of accounts & solvency.

The due date of filing of Form 08 is 30 days from the end of 6 months of the financial year to which it relates and Form-11 is on or before 30th of May every year.

Contents of From-08 And Form-11

Contents of From-08:

The name of form itself suggests the details needs to be filed under it. It requires a declaration about the income and expenditure made during the financial year, profit or loss made thereon during the financial year and the assets and liability of the LLP. The form needs to be signed by 2 designated partners and it should be certified by practicing Chartered accountant or Practicing Company secretary or Practicing Cost accountant.

Contents of Form-11:

The From 11 of LLP annual filing commonly known as Annual Return of LLP is declaration regarding the number of designated partners and partners and contribution received from each designated partners and regular partners.