The Limited Liability Partnership Act 2008 provides the benefits of limited liability while allowing its members the flexibility of organizing their internal structure as a partnership based on an agreement. Limited Liability Partnership (LLP) enables the partners to venture into diverse areas of business with the save guard of limiting its liability.
The act has the following salient features:
1. LLP is a body corporate and, therefore a legal entity separate from its partners.
2. A minimum of two persons can form for it any lawful business by signing the incorporation document and getting it registered with the Registrar.
3. Its partners can define their mutual rights and obligations under their own agreement or agreement with LLP. In the absence of any such agreement the provisions of the Act would apply.
4. The partnership firm would be liable to the full extent of its assets. The partner would be liable to the extent of their agreed contributions. No partner would be liable for independent or unauthorized acts of other partners or for their misconduct. The liability of the firm and that of partners who have acted with intent to defraud creditors or for any fraudulent purpose is to be unlimited for all or any of the debts or other.
5. Every LLP has to have at least two individuals as designated partners. At least one of them should be resident in India. Their duties and obligations are to be prescribed by law.
6. The LLP has to prepare annual accounts showing true and fair view of the state of affairs. They have to be failed with the Registrar after being audited. The Central Government can exempt a class of LLP’s from the requirement auditing.
7. In case of need, the Central Government may appoint inspectors to investigate affairs of the company.
8. Provisions have been made for compromise or arrangement including amalgamation.
9. A firm, private company or an unlisted public company are to be allowed to convert into LLP.
10. An LLP may be wound up voluntarily or by the Tribunal to be established under the companies. Before any such Tribunal is to so established, the power is to be that of the High Court.
11. The Central Government can apply the provisions of the Companies Act to such partnerships.
Under chapter 3 of the Act and LLP has to have certain incorporation documents. These documents have to follow prescribed format in which the name of the LLP and details of its business, address, partners, have to be stated.
The said LLP has to be registered. Registration of the LLP enables the LLP to sue and be sued in its own name, acquire, own, and dispose of immovable and movable properties.
An LLP functions on the principle of Limited Liability. Hence an LLP can not be bound to third parties an act done by a partner who has no authority to act for the partnership in doing such an act.
An LLP in a liable if any of its partner becomes liable to any person as a result of wrongful act or omission on his part in the course of the LLP business when the act has been done with authority.
However, there is one situation in which LLP and its partners are deprived of the benefit of Limited Liability to unlimited liability. Such a situation would rise when the act is carried by LLP or any of its partners that intent to defraud LLP creditors or an act is done for fraudulent purpose.