What is LLP?
The LLP is a body corporate and a legal entity separate from its partners. Any two or more persons, associated for carrying on a lawful business with the aim to profit, may by subscribing their names to an incorporation document and filing the same with the Registrar, form a Limited Liability Partnership.
LLP combines the advantages of both the Company and Partnership into a single form of organisation. In an LLP, one partner is not responsible or liable for another partner’s misconduct or negligence; this is an important difference from that of an unlimited partnership.
Advantages of LLP
- LLP is cost effective. If a partnership model of Rs 1 lakh will incur a cost of Rs 7 lakh to execute it, a LLP model will incur only Rs 2 lakh.
- LLP is a separate legal entity, separate from its partners, can own assets in its name, sue and be sued. This limits the liability of partners as individuals.
- One partner is not liable for another partner’s misconduct or negligence. Say in case of a fraud by one partner the other partner will be liable only for what they committed in the agreement and not for the one who did fraud.
- The duties, liabilities and rights of the partners are governed by the LLP agreement. Hence, there is the freedom to define your share of all the above.
- Liability of the partners is limited to the extent of their contribution in the LLP. No exposure of personal assets of the partner, except in cases of fraud.
- In an LLP the maximum number of partners is not fixed. The minimum of course is two.
- Easy to dissolve and wind up