LLP

Limited Liability partnership:

A new trend that has been observed of-late is that more and more entreprenuers have started opting for Limited Liability Partnerships. But What is a Limited Liability Partnership? Before answering this question we’ll explain you reasons behind the emergence of LLP’s.

Till a few years back there used to be only 2 forms of Organisations

1. Limited Liability Organisations i.e. Companies

2. Unlimited Liability Partnerships i.e. Partnership/ Proprietorship

Both these forms of organisations have their own plus and minuses. There is limited liability of the Owners in a Company as compared to Partnerships/Proprietorship which are easy to form and operate but Small Businesses & Professionals usually tend to opt for Partnerships as they are easy to form and operate.

However, as Businesses grew there was a need for a form of organisation which was a hybrid between the 2 forms of organisations. Moreover, the rapid growth of Service Sector created an environment and a demand for a new form of Organisation. Thus, the concept of Limited Liability Partnership was evolved which incorporates the benefits of both Companies as well as Partnerships.

The Law defines LLP as:

“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”

Features of LLP :

1. The LLP has Separate Legal Entity i.e. the LLP and the partners are distinct from each other.

2. Minimum of 2 partners are required to form a LLP. However, there is no limit on the maximum number of partners.

3. No requirement of Minimum Capital Contribution.

4. The LLP Act does not restrict the benefit of LLP structure to certain classes of Professionals only and would be available for use by any enterprise.