LIMITED LIABILITY PARTNERSHIP ACT - SALIENT FEATURES

 LIMITED LIABILITY PARTNERSHIP ACT - SALIENT FEATURES

 The LLP will be an alternative corporate business vehicle that would give the benefits of limited liability but would allow its members the flexibility of organizing their internal structure as a partnership based on an agreement. The proposed Bill does not restrict the benefit of LLP structure to certain classes of professionals (as in some countries) but would be available for all enterprises that fulfill the requirements of the Act. LLP will be a body corporate and a legal entity separate from its partners.
 A LLP will have perpetual succession. While the LLP will be a separate legal entity, liable fully 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.
 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 cannot exceed 20.
 A LLP shall be under obligation to maintain annual accounts reflecting true and fair view of its state of affairs.
 Since tax matters of all entities in India are addressed in the Income Tax Act, 1961, the taxation of LLPs will be as addressed in the Income Tax Act.
 Provisions are made in the Bill for corporate actions like mergers, amalgamations etc.
 While enabling provisions in respect of winding up and dissolutions of LLPs have been made in the Bill, detailed provisions in this regard would be provided by way of rules under the Act.
 The Act also provides for conversion of existing partnership firm, private limited company and unlisted public company into a LLP.
 Nothing Contained in the Partnership Act 1932 will affect an LLP.
 The Registrar of Companies will register and control LLPs also.
Conceptually, an LLP is a hybrid corporate form entity combining features of the existing partnership firms and limited liability companies. LLP combines the benefits of limited liability for partners with flexibility to organize internal management based on mutual agreement among the partners. India’s 1932 Partnership law permitted partnership firms with unlimited liability.
Following are as the salient features of the LLP bill, 2008:
 LLP shall be a body corporate and a legal entity separate from its partners. It will have perpetual succession like a corporation;
 Provisions of the Indian Partnership Act, 1932 shall not be applicable to LLPs and there shall not be any upper limit or number of partners in an LLP unlike an ordinary partnership firm where the maximum number of partners cannot exceed 20; (10 in case of banking);
 While the LLP will be a separate legal entity, liable to the full extent of its assets, the liability of the partners would be limited to their agreed contribution to the LLP. Further, no partner would be liable on account of independent or unauthorized actions of other partners to be shielded from joint liability created by another partner’s wrongful business decisions or misconduct;
 The framework of LLP is not restricted to professional services alone. Several business activities can be undertaken using the LLP structure;
 Any individual or body corporate may be a partner in LLP:
 An LLP shall be under obligation to maintain annual accounts reflecting true and far view of its rate of affairs; and
 The bill contains procedures for corporate actions like mergers, amalgamations, liquidations etc.

The LLP Act will be administered by Ministry of Corporate Affairs. LLPs would need to be necessarily registered with registrar of companies by submitting necessary documents. The registration of LLPs will be a time bound (approx 2 weeks) and paperless affair and would be covered under MCA-21 e-governance programme of the Ministry of Corporate Affairs.