Limited Liability Partnership

THE INSTITUTE OF CHARTERED ACCOUNTANTS OF
INDIA
BATCH 14
ITT PROJECT
MS POWERPOINT
SUBMITTED BY :- SUBMITTED TO:-

PRANAY SHARMA CA HITENDRA JAIN SIR
CRO0703373
THE LIMITED LIABILITY
PARTNERSHIP ACT, 2008
1. MEANING AND CONCEPT
2. CHARACTERISTICS
MEANING AND CONCEPT
• A LLP is a new form of legal business entity with limited liability. It is an alternative
corporate business vehicle that not only gives the benefits of limited liability at low
compliance cost but allows its partners the flexibility of organising their internal structure
as a traditional partnership. The LLP is a separate legal entity and, while the LLP itself
will be liable for the full extent of its assets, the liability of the partners will be limited.
MEANING AND CONCEPT
• LLP as a separate legal entity and business organisation is an alternative corporate

business form that gives the benefits of limited liability of a company and the flexibility
of a partnership. Since LLP contains elements of both 'a corporate structure' as well as 'a
partnership firm structure' LLP is called a hybrid between a company and a partnership.
MEANING AND CONCEPT
• Non-applicability of the Indian Partnership Act, 1932 (Section 4): Save as otherwise
provided, the provisions of the Indian Partnership Act, 1932 shall not apply to a LLP.
• Partners (Section 5): Any individual or body corporate may be a partner in a LLP. However,
an individual shall not be capable of becoming a partner of a LLP, if—
• (a) he has been found to be of unsound mind by a Court of competent jurisdiction and the
finding is in force;
• (b) he is an undischarged insolvent; or
• (c) he has applied to be adjudicated as an insolvent and his application is pending.
MEANING AND CONCEPT
• Minimum number of partners (Section 6): (i) Every LLP shall have at least two partners.
• (ii) If at any time the number of partners of a LLP is reduced below two and the LLP
carries on business for more than six months while the number is so reduced, the person,
who is the only partner of the LLP during the time that it so carries on business after
those six months and has the knowledge of the fact that it is carrying on business with
him alone, shall be liable personally for the obligations of the LLP incurred during that
period.
MEANING AND CONCEPT
• Designated partners (Section 7):

• (i) Every LLP shall have at least two designated partners who are individuals and at least one of
them shall be a resident in India.
• (ii) If in LLP, all the partners are bodies corporate or in which one or more partners are individuals
and bodies corporate, at least two individuals who are partners of such LLP or nominees of such
bodies corporate shall act as designated partners.
• Example 2: A LLP by the name SMY LLP has three partners namely 1. SI Limited, 2. MIS
Limited, 3. YI Private Limited. This will not be considered for registration because the requirement
for LLP is to have 2 individual members as partners apart from the body corporates.
MEANING AND CONCEPT
• Accordingly, the said SMY LLP must consist of at least five partners, namely the three
body corporates and 2 individual members to constitute the LLP and the two individuals
need to be treated as designated partners.
MEANING AND CONCEPT
• iii) Resident in India: For the purposes of this section, the term "resident in India" means
a person who has stayed in India for a period of not less than 182 days during the
immediately preceding one year.
• Example 3: There is an LLP by the name Indian Helicopters LLP having 5 partners
namely Mr. A (Non resident), Mr. B (Non Resident) Ms. C (resident), Ms. D (resident)
and Ms. E (resident). In this case, at least 2 should be named as Designated Partner out of
which 1 should be resident. Hence, if Mr. A and Mr. B are designated then it will not
serve the purpose. One of the designated partners should be there out of Ms. C, Ms. D
and Ms. E.
CHARACTERISTICS OF LLP
• 1. LLP is a body corporate: Section 2(1)(d) of the LLP Act, 2008 provides that a LLP is a
body corporate formed and incorporated under this Act and is a legal entity separate from
that of its partners and shall have perpetual succession. Therefore, any change in the
partners of a LLP shall not affect the existence, rights or liabilities of the LLP.
• Section 3 of LLP Act provides that a LLP is a body corporate formed and incorporated
under this Act and is a legal entity separate from that of its partners.
• 2. Perpetual Succession: The LLP can continue its existence irrespective of changes in
partners. Death, insanity, retirement or insolvency of partners has no impact on the
existence of LLP. It is capable of entering into contracts and holding property in its own
name.
• 3. Separate Legal Entity: The LLP as a separate legal entity, is liable to the full extent of
its assets but liability of the partners is limited to their agreed contribution in the LLP. In
other words, creditors of LLP shall be the creditors of LLP alone.
• 4. Mutual Agency: No partner is liable on account of the independent or un-authorized

actions of other partners, thus individual partners are shielded from joint liability created by
another partner's wrongful business decisions or misconduct. In other words, all partners
will be the agents of the LLP alone. No partner can bind the other partner by his acts.
• 5. LLP Agreement: Mutual rights and duties of the partners within a LLP are governed by
an agreement between the partners. The LLP Act, 2008 provides flexibility to partner to
devise the agreement as per their choice. In the absence of any such agreement, the mutual
rights and duties shall be governed by the provisions of the LLP Act, 2008.
• 6. Artificial Legal Person: A LLP is an artificial legal person because it is created by a

legal process and is clothed with all rights of an individual. It can do everything which
any natural person can do, except of course that, it cannot be sent to jail, cannot take an
oath, cannot marry or get divorce nor can it practice a learned profession like CA or
Medicine. A LLP is invisible, intangible, immortal (it can be dissolved by law alone) but
not fictitious because it really exists
• 7. Common Seal: A LLP being an artificial person can act through its partners and
designated partners. LLP may have a common seal, if it decides to have one [Section 14(c)].
Thus, it is not mandatory for a LLP to have a common seal. It shall remain under the
custody of some responsible official and it shall be affixed in the presence of at least 2
designated partners of the LLP.
• 8. Limited Liability: Every partner of a LLP is, for the purpose of the business of LLP, the
agent of the LLP, but not of other partners (Section 26). The liability of the partners will be
limited to their agreed contribution in the LLP. Such contribution may be of tangible or
intangible nature or both.
• Example 4: The professionals like Engineering consultants, Legal Advisors and

Accounting Professional are afraid of entering into business due to unlimited liability.
Hence the LLP partnership Act provides an avenue for these professionals to Limited
Liability Partnership firms which restricts their liability to the agreed amount. This has
encouraged Professionals to form LLP.
• 9. Management of Business: The partners in the LLP are entitled to manage the business
of LLP. But only the designated partners are responsible for legal compliances.
• 10. Minimum and Maximum number of Partners: Every LLP shall have least two partners and shall also
have at least 2 individuals as designated partners, of whom at least one shall be resident in India. There
is no maximum limit on the partners in LLP.
• 11. Business for Profit Only: The essential requirement for forming LLP is carrying on a lawful business
with a view to earn profit. Thus, LLP cannot be formed for charitable or non-economic purpose.
• 12. Investigation: The Central Government shall have powers to investigate the affairs of an LLP by
appointment of competence authority for the purpose.
• 13. Compromise or Arrangement: Any compromise or agreements including merger and amalgamation
of LLPs shall be in accordance with the provisions of the LLP Act, 2008.
• 13. Compromise or Arrangement: Any compromise or agreements including merger and

amalgamation of LLPs shall be in accordance with the provisions of the LLP Act, 2008.
• 14. Conversion into LLP: A firm, private company or an unlisted public company would
be allowed to be converted into LLP in accordance with the provisions of LLP Act, 2008.
• 15. E-Filling of Documents: Every form or application of document required to be filed
or delivered under the act and rules made thereunder, shall be filed in computer readable
electronic form on its website www.mca.gov.in and authenticated by a partner or
designated partner of LLP by the use of electronic or digital signature.
• 16. Foreign LLPs: Section 2(1)(m) defines foreign limited liability partnership "as a
limited liability partnership formed, incorporated, or registered outside India which
established as place of business within India". Foreign LLP can become a partner in an
Indian LLP.
THE END

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THE INSTITUTE OF CHARTERED ACCOUNTANTS OF

SUBMITTED BY :- SUBMITTED TO:-

• LLP as a separate legal entity and business organisation is an alternative corporate

• Designated partners (Section 7):

• 4. Mutual Agency: No partner is liable on account of the independent or un-authorized

• 6. Artificial Legal Person: A LLP is an artificial legal person because it is created by a

• Example 4: The professionals like Engineering consultants, Legal Advisors and

• 13. Compromise or Arrangement: Any compromise or agreements including merger and

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