Overview of Limited Liability Partnership

DEFINITION

LLP is a corporate business vehicle that enables professional expertise and entrepreneurial initiative to combine and operate in flexible, innovative and efficient manner, providing benefits of limited liability while allowing its members the flexibility for organizing their internal structure as a partnership.

NATURE OF LIMITED LIABILITY PARTNERSHIP

• LLP is a separate legal entity from their Members.
• LLP have the benefit of limited liability for their Members.
• They are taxed as a partnership.
• Their "trading disclosure" requirements are similar to those of a company.
• They must be registered at Companies House.
• Their accounting and filing requirements are similar to those of a company.
• They have the ability to create floating charges.
• Every Limited Liability Partnership shall use the words "Limited Liability Partnership" or its acronym "LLP" as the last words of its name.
• The Central Government may investigate into the affairs of an LLP by appointing a competent Inspector.

ADVANTAGES OF LIMITED LIABILITY PARTNERSHIP

1. Easy to form
2. Liability
3. Perpetual succession
4. Management of the Company
5. Easy transferability of ownership
6. Taxation
7. No compulsory requirement of audit
8. Fewer compliance requirement
9. Flexible agreement
10. Easy to wind up

DISADVANTAGES OF LIMITED LIABILITY PARTNERSHIP

1. Restricted Access to Capital Markets
2. Rights of partners
3. Public Disclosure of LLP Information
4. Limitations in Formation of LLP
5. Offenses and penalties
6. Exit Options are Not Easy for LLPs in default of Filings
7. Limitation in External Commercial Borrowings (ECB)

PROCEDURE FOR INCORPORATION

• The incorporation document shall be filed in Form for incorporation of Limited Liability Partnership which is FiLLip (Form for incorporation of Limited Liability Partnership) with the Registrar.
• If an individual required to be appointed as designated partner does not have a DPIN or DIN, application for allotment of DPIN shall be made in the same form.
• The application for allotment of DPIN shall not be made by more than two individuals in Form FiLLiP
• An application for reservation of name can also be made through Form Provided also that where an applicant had applied for reservation of name under rule 18 in Form RUN-LLP which is Reserve Unique Name-Limited Liability Partnership and which has been approved, he may fill the reserved name as the proposed name of limited liability partnership.

LIMITED LIABILITY PARTNERSHIP AGREEMENT

• "Limited liability LLP Agreements mean any written agreement between the partners of the Limited Liability Partnership or between the Limited Liability Partnership and its partners which determines mutual rights and duties of the partners and their rights and duties in relation to that limited liability partnership [section 2(1)(0)]."
• It is compulsory to make and execute a LLP agreement within 30 days of the incorporation of LLP.
• The value of stamp paper on which the LLP agreement must be printed or stamp duty to be paid on the LLP agreement is dependent on the state of incorporation and amount of capital contribution from the partners.

SOME OF THE ESSENTIAL CLAUSE IN LIMITED LIABILITY PARTNERSHIP AGREEMENT

Interpretation / definitions.
1. Designated partners.
2. Name of the LLP and changes to it.
3. Registered office of the LLP.
4. Business of the LLP.
5. Capital contribution.
6. Profit sharing ratio.
7. Remuneration & interest to be paid to partners.
8. Bank account.
9. Books of accounts and accounting year.
10. Dispute resolution.
11. Term of LLP /winding up.
12. General provisions.
13. Rights and duties of designated partners.
14. Admission of partner, retirement resignation and expulsion of partners.