New form of Company - LIMITED LIABILITY PARTNERSHIP

When someone comes to us with an idea of starting up a business, we have always suggested them to opt for a Private Limited type of company as it gives them the advantage of 'limited liability'.But things have changed in the recent years with an introduction of a new form of company called Limited Liability Partnership (LLP).

Limited Liability Partnership (LLP), is a registered partnership company under the Limited Liability Partnership Act, 2008.The Act came into force on 31st March, 2009.

Requirements :

• Minimum of two partners.Any individual or a company may be a partner in LLP.
• Atleast two 'Designated Partners' who are individuals and atleast one of them should be a resident of India.
• Limited Liability Partnership Agreement

How is it different from the Partnership?

• Unlike Partnership Firm, LLP is a separate legal entity (jus like a Pvt./Public limited co.,).That is, LLP can sue others and be sued in its own name, without involving its partners.
• The liability of the Partners of LLP is limited to the amount contributed by them.
• Like Pvt./Public limited cos., the LLP has a perpetual succession.That is, the company lives beyond the lives of the partners.
• Partnership Firm is formed either orally or by a deed of agreement, whether registered or not, but LLP is formed by an incorporation document and an LLP agreement.

From Company -

• The Memorandum and  Articles of Association,as required by the Companies Act has been done away with the inclusion of LLP Agreement under the LLP Act.
• In LLP, there is no mandatory or periodical meetings of Directors and Shareholders to be complied with.
• There is no regulation on remuneration of the Directors under LLP.Directors are paid as per the LLP Agreement.
• LLP can choose to keep its accounts on cash basis whereas under Companies Act, accrual method is compulsory.
• The appointment of Part time/ Full time Company Secretary is not required under LLP.

In short, LLP is the right blend of Partnership firm's freedom of internal management and Company's protection of 'limited liability'.

LLP is best suited for small and medium sized enterprises,Professionals like Practicing Company Secretaries.,Chartered Accountants,etc., and Venture Capitalists.Firms already registered under Partnership Act, Private Limited Companies and Unlisted Public Companies may also be converted into LLP.

The process of LLP Registration is more similar to that of the Registration of a Pvt. Limited Co.,