The Limited Liability Partnership Act, 2008
The Limited Liability Partnership Act, 2008
1. Introduction
The Limited Liability Partnership (LLP) Act, 2008, was enacted by the Indian Parliament to provide a hybrid business structure that combines the benefits of a partnership and a company. LLPs offer limited liability protection to partners while allowing them the flexibility of organizing their internal structure as a partnership.
2. Key Features of LLP
Separate Legal Entity: LLP is a separate legal entity from its partners.
Limited Liability: Partners’ liability is limited to their agreed contribution in the LLP.
Perpetual Succession: LLP continues to exist regardless of changes in partners.
Flexible Internal Management: Partners can organize their internal structure as per the LLP agreement.
No Minimum Capital Requirement: Unlike companies, LLPs do not require a minimum paid-up capital.
Taxation: LLPs are taxed as a partnership firm, avoiding double taxation applicable to companies.
3. Formation and Registration
Partners: Minimum 2 partners are required. Partners can be individuals or companies.
Incorporation: LLP is registered with the Registrar of Companies (ROC).
Incorporation Documents: LLP agreement and incorporation documents must be filed.
4. Liabilities of Partners
Partners are not personally liable for the LLP’s debts or liabilities beyond their contribution.
LLP is liable for the acts of its partners.
5. Management and Control
Managed by designated partners appointed as per the LLP agreement.
LLP agreement governs the mutual rights and duties of partners.
6. Compliance and Filings
Annual return and statement of accounts must be filed with ROC.
Maintain proper books of accounts.
Important Provisions of LLP Act, 2008
| Section | Provision |
|---|---|
| Section 3 | Incorporation of LLP |
| Section 4 | Limited Liability Partnership Agreement |
| Section 6 | Partners and Designated Partners |
| Section 11 | Limited Liability of Partners |
| Section 24 | Registered Office and Change of Registered Office |
| Section 33 | Annual Return Filing |
| Section 34 | Statement of Account and Solvency |
Relevant Case Laws
1. Vodafone India Services Pvt. Ltd. v. Union of India (2012)
Issue: Whether LLP is a distinct legal entity separate from its partners.
Judgment: The Bombay High Court held that an LLP has a separate legal entity distinct from its partners, reinforcing that the LLP structure is akin to a company with limited liability features.
2. CIT v. Khoday India Ltd. (2016)
Issue: Taxation aspects of LLP and its partners.
Judgment: The court observed that LLP is taxable as a firm, and income is taxed only at the LLP level, avoiding double taxation.
3. ICICI Bank Ltd. v. Satyam Computer Services Ltd. (2010)
Issue: Liability of partners in LLP.
Judgment: The court held that partners are not personally liable for LLP debts beyond their capital contribution, protecting personal assets.
Comparison Between LLP and Other Business Entities
| Feature | LLP | Partnership | Company |
|---|---|---|---|
| Legal Status | Separate Legal Entity | No Separate Entity | Separate Legal Entity |
| Liability | Limited to Contribution | Unlimited | Limited to Share Capital |
| Perpetual Succession | Yes | No | Yes |
| Compliance | Moderate | Minimal | High |
| Taxation | Taxed as Partnership | Taxed as Partnership | Double Taxation |
Summary
The LLP Act, 2008 provides a flexible, simple, and transparent legal structure with limited liability protection to partners. It combines the operational flexibility of a partnership with the advantages of limited liability of a company, making it an attractive choice for professionals, entrepreneurs, and businesses.
RELATED Blog
0 comments