Limited Liability Partnership | Ignish legal care

 Limited Liability Partnership (LLP)

A typical partnership sort of the business suffers from the matter of unlimited liability. Liabilities of partners of a firm extend right up to their personal assets. This makes regular partnerships undesirable for a lot of entrepreneurs. One solution for this issue exists within the type of liability Partnerships, better referred to as LLP on ignis legal care.

Limited Liability Partnerships (LLP)

Partners of typical partnership firms have unlimited liability towards their collective debts and legal consequences. this suggests that their own assets are responsible for attachment for meeting the firm’s debts and liabilities. And limited liability partnerships (LLP) solves this problem.

An LLP has all basic features of an everyday partnership firm, except that of same legal entity status and unlimited liability of partners. Consequently, indebtedness partnerships have legal existence and identity separate from that of its partners. Furthermore, its partners have limited liabilities.

Limited Liability Partnerships

Definition of LLP

The Parliament of India passed the limited liability Partnership Act in 2008 to manipulate LLP businesses in India. consistent with Section 2 of this law, an LLP may be a partnership registered under the Act. Further, an LLP agreement means a agreement either between an LLP’s partners or between the LLP itself and its partners. This agreement defines the rights, liabilities, duties, and powers of the partners.

Since the limited liability Partnership Act, 2008 specifically governs indebtedness partnerships in India, the provisions of the Indian Partnership Act, 1932 aren't applicable to LLPs. They only apply to traditional partnership firms.

Browse more Topics under Introduction To Partnership Accounting

Definition and Features of Partnership

Partnership Deed

Profit and Loss Appropriation Account

Fixed and Fluctuating Capital

Distinct Features of an LLP

A limited liability partnership contains the subsequent peculiar features:

1. Separate legal entity

Unlike regular partnership firms, limited liability partnerships are treated as separate legal entities. this means that LLPs can own assets and incur liabilities in their own names. they can also enter into contracts and sue and be sued in their own names.

2. limited liability of partners

The liabilities of partners of an LLP are separate and limited. Their personal assets won't susceptible to attachment just in case the LLP is completing or suffering certain legal consequences of repayment of debt.

Partners’ liabilities, however, can become unlimited in cases of offenses like fraud, the commission of an offense, or any other wrongful and illegal act.

3. Sharing of profits

All partners of indebtedness partnerships share profits of business even as partners of normal firms. They are, however, liberal to decide the ratio during which they're going to share profits.

4. Partners of LLPs

Partners of a limited liability partnership will be either natural persons, i.e. individuals, or perhaps body corporates. Furthermore, an individual can't be a partner if he suffers from unsoundness of mind or he's insolvent.

LLPs must have a minimum of two partners in the least times. Also, the utmost number of partners is unlimited, while it's restricted to 50 for regular partnership firms. If at any time, the amount of partners in an LLP becomes less than two, and the sole partner carries on business for more than six months under such circumstances, his liability towards the firm’s business will become unlimited.