Limited liability partnership definition
Limited Liability partnership is incorporated under the Limited Liability Partnership Act, 2008 where unlike the traditional partnership have a separate legal entity, can hold property, having perpetual succession and there is no liability of one member to be responsible for the negligence or misconduct of the other member. According to the Indo American Chamber of Commerce the limited liability partnership is defined as “a hybrid between a company and a partnership” as LLP allows its members upon agreement to have flexibility in their internal structure and at the same time provides benefits of limited liability.
The minimum number of members for LLP registration in India is two and there is no limit for the maximum number. If the minimum number falls below two and it continues even after a period of six months then the only partner in the firm will be responsible for liabilities incurred during that period (section 6(2) of Limited Liability Partnership Act, 2008). Any individual or body corporate cannot be a partner in the limited liability partnership if he is of unsound mind, if he is an undischarged insolvent or if he has applied to be adjudicated as an insolvent and such an application is pending.
Procedure for incorporation
Two or more persons who wishes to start a lawful business in India should subscribe their names to an incorporation document and file it with the Registrar in which the registered office of the limited liability partnership is to be registered along with the prescribed fees. This should be in the prescribed form which should state the name of the LLP, address of the registered office, the proposed business and the name and address of the partners and designated partners. On satisfying the conditions the registrar shall register the incorporation document and issue a certificate stating that the LLP is incorporated in the name specified. After registration the LLP is capable of being sued, can acquire, own, hold and dispose the property, can have a common seal if it decides so and can do and suffer all other acts as may be lawfully done by a body corporate. The name of the LLP should have the words ‘limited liability partnership or LLP’ at the end. The name should be such that it should neither resemble any the name of any other partnership, LLP, body corporate or registered trademark nor undesirable in the opinion of the Central Government.
On incorporation the persons who had subscribed their names would be partners of the LLP and any other person who wishes to be the partner can be a partner in accordance with the limited liability partnership agreement.
A person ceases to be a partner on his death or dissolution of the partnership, if he is declared to be of unsound mind or if he declared or has applied to be declared of unsound mind. Such a partner will be referred as former partner. The LLP has to file a notice to the Registrar in case a person ceases to be the partner or if there is a change in the address of a partner within thirty days of such change.
Each partner of the LLP can be regarded as the agent of the partnership firm but not as an agent of other partners for the purpose of the business. If any act is carried on by the LLP or any of its partners with an intention to defraud the creditors, then the LLP as well as the partners will be having unlimited liability. The LLP can escape the liability arising from the fraudulent act of a partner only if it proves that the act was done without the knowledge of the limited liability partnership. Otherwise they will be liable to the same extent as that of the partner. The Act in India is having a provision regarding whistle blowing also. The court or the Tribunal is having the power to reduce or waive the liability of any partner or employee of the LLP in case he has provided any useful information during the investigation.
LLP was incorporated with an idea to meet the emerging needs of the business world. As every aspect is having its own pros and cons, the same way LLP is also having the benefits as well as drawbacks. If used in the proper way the LLP will bring benefits to the business industry. If you wish to know more about Limited liability partnership in India or know how to register a LLP in India. Just call us on 0091 – 9847182002.