Limited Liability Partnership in India

A law to allow "Limited Liability Partnership" (LLP) in India has been enacted by the Parliament of India recently.The Limited Liability Parternship Act, 2008 (LLP Act) came into force on January 9, 2009. An LLP has elements of partnerships and corporations. LLP is a corporate form that provides for a business format that would combine the flexibility of a partnership and the advantages of limited liability of a company at a low compliance cost. The salient features of the LLP Act are as under:-

• The idea behind the concept of LLP is basically to introduce a corporate form which combines the benefits of limited liability and also allow its members the organizational flexibility.
• The mutual rights and duties of the partners of an LLP shall be governed by a registered agreement between partners or between the LLP and the partners.
• The Act does not restrict the benefit of LLP structure to certain classes of professionals only and would be available for use by any enterprise which fulfills the requirements of the Act.
• The Act makes provision for formation of such body corporate which shall be incorporated under LLP Act, and shall have a distinct legal entity separate from that of its partners. Liability of the LLP shall be to the full extent of its assets, the liability of the partners would be limited to their agreed contribution in the LLP. Further, no partner would be liable on account of the independent or un-authorized actions of other partners, thus allowing individual partners to be shielded from joint liability created by another partner's wrongful business decisions or misconduct.
• LLP being a separate legal entity will have perpetual succession. Indian Partnership Act, 1932 shall not be applicable to LLPs and there shall not be any upper limit on number of partners in an LLP unlike an ordinary partnership firm where the maximum number of partners can not exceed 20.
• Every LLP has to be registered with the Registrar of Companies (RoC).
• Every LLP will have at least two "designated partners" of which one shall be a resident of India. Designated partners shall be responsible for the doing of all the matters and things as are required to be done by the LLP in respect of compliance of the provisions laid down in the Act and be liable for penalties for non- compliance. If at any time there is only one designated partner, all the other partners will be treated as designated partners and held similarly responsible. Every designated partner shall obtain a Partner Identification Number (PIN), which is similar to the Director Identification Number (DIN) required for directors of companies.