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Limited Liability Partnership Formation
  • 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 but liability of the partners is limited to their agreed contribution in the LLP.
  • Further, no partner is liable on account of the independent or un-authorized actions of other partners, 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 a LLP are governed by an agreement between the partners or between the partners and the LLP as the case may be.
Structure of an LLP
  • LLP shall be a body corporate and a legal entity separate from its partners. It will have perpetual succession.
Difference between LLP & "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.
  • Under LLP 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.
Advantages
  • Seprate Legal Entity.
  • Internationally Legal Form of Business.
  • No Restriction on Maximum No Of Partners.
  • Personal Assets of Partners are not Exposed.
  • Liability of Partners would be limited to the Agreed Contribution in LLP.
  • No requirement to Maintain Statutory Books or Records.
  • Less Cost Of Formation.
  • Easy To Dissolve and windup.
Difference between LLP & a Company
  • 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, 2013) whereas for an LLP it would be by a contractual agreement between partners.
  • The management-ownership divide inherent in a company is not there in a limited liability partnership.
  • LLP will have more flexibility as compared to a company, best suited for small.

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