| Meaning- Limited Liability Partnership: | | | | maximum number of partners a firm can have. |
| Limited Liability Partnership (LLP) is also known as | | | | Limited Liability Partnership: An Indian Prospective |
| Professional Association, in which the liability of the | | | | Due to the legal stipulation of unlimited liability among |
| investor/partner is limited to the amount invested by | | | | partners, Indian partnerships are mostly restricted to |
| him/her in the business. | | | | family members and persons who know each other |
| Nature- Limited Liability Partnership: | | | | thoroughly. LLP being a form of partnership having |
| LLP has elements of partnerships and corporations. In | | | | characteristics of a company will limit liability in the case |
| an LLP, all partners have a form of limited liability, similar | | | | of business failure or professional negligence. |
| to that of the shareholders of a corporation. However, | | | | Characteristics of LLP Bill, 2008: |
| the partners have the right to manage the business | | | | 1. The LLP will be an alternative corporate business |
| directly, and a different level of tax liability than in a | | | | vehicle that would give the benefits of limited liability but |
| corporation. | | | | would allow its members the flexibility of organizing |
| Difference- Limited Liability Partnership and Limited | | | | their internal structure as a partnership based on an |
| Partnership: | | | | agreement. |
| Limited Liability Partnerships (LLP) are distinct from | | | | 2. The LLP Act does not restrict the benefit of LLP |
| limited partnerships, in that limited liability is granted to all | | | | structure to certain classes of professionals only and |
| partners, not to a subset of non-managing "limited | | | | would be available for use by any enterprise which |
| partners". As a result the LLP is more suited for | | | | fulfills the requirements of the Act. |
| businesses where all investors wish to take an active | | | | 3. While the LLP will be a separate legal entity, liable to |
| role in management. | | | | the full extent of its assets, the liability of the partners |
| LLP- General View: | | | | would be limited to their agreed contribution in the LLP. |
| LLP laws exist in various developed countries like the | | | | Further, no partner would be liable on account of the |
| UK, the US, Australia and Singapore. Introduction of | | | | independent or un-authorized actions of other partners, |
| LLP laws in some countries results from the need of | | | | thus allowing individual partners to be shielded from |
| professional firms who not only want the tax benefits | | | | joint liability created by another partner's wrongful |
| and traditional structure of a partnership but also the | | | | business decisions or misconduct. |
| protection from unlimited liability. In the United States, | | | | 4. LLP shall be a body corporate and a legal entity |
| each individual state has its own law governing their | | | | separate from its partners. It will have perpetual |
| formation. Limited liability partnerships emerged in the | | | | succession. Indian Partnership Act, 1932 shall not be |
| early 1990s popular among professionals, particularly | | | | applicable to LLPs and there shall not be any upper |
| lawyers, accountants and architects. An obligation of a | | | | limit on number of partners in an LLP unlike an ordinary |
| partnership incurred while the partnership is a limited | | | | partnership firm where the maximum number of |
| liability partnership, whether arising in contract, tort, or | | | | partners cannot exceed 20. |
| otherwise, is solely the obligation of the partnership. A | | | | 5. The taxation of LLPs shall be addressed in the |
| partner is not personally liable, directly or indirectly, by | | | | Income Tax Act, 1961 which regulates taxation of all |
| way of contribution or otherwise, for such an obligation | | | | form of entities. |
| solely by reason of being or so acting as a partner. As | | | | 6. Provisions have been made for corporate actions |
| in a partnership or limited liability company (LLC), the | | | | like mergers, amalgamations etc. |
| profits of an LLP are distributed among the partners | | | | 7. While enabling provisions in respect of winding up |
| for tax purposes, avoiding the problem of "double | | | | and dissolutions of LLPs have been made, detailed |
| taxation" often found in corporations. | | | | provisions in this regard would be provided by way of |
| In the U.K, LLPs are governed by the LL .Pact. A UK | | | | rules under the Act. |
| Limited Liability Partnership is a Corporate body - that | | | | 8. The Act also provides for conversion of existing |
| is to say, it has a continuing legal existence | | | | partnership firm, private limited company and unlisted |
| independent of its Members, as compared to a | | | | public company into a LLP. |
| partnership which may (in England and Wales they do | | | | By passing the Limited Liability Partnership Bill, 2008 the |
| not) have a legal existence dependent upon its | | | | Indian Partnership has been put to a par with foreign |
| Membership. A UK LLP is tax transparent or | | | | firms. |
| pass-through for tax purposes, that is to say it pays | | | | Concept Limited Liability Partnership: |
| no tax but its Members do in relation to the income or | | | | The LLP Bill has facilitated creation of a new |
| gains they receive through the LLP. There is in fact no | | | | corporate structure that will boost growth in the |
| requirement for the LLP agreement even to be in | | | | economy, particularly in professional advisory services |
| writing because simple partnership-based regulations | | | | in accounting, legal and insurance industries. LLPs make |
| apply by way of default provisions. It has to date been | | | | it easier for investors and professionals to jointly do |
| closely replicated by Japan and by the financial | | | | businesses that involve greater risk. |
| centers of Dubai and Qatar. It is perhaps closest in | | | | Concept of LLP- Winding Up & Dissolution:o The |
| nature to the limited liability company although it may be | | | | partner has fiduciary duties towards LLP and other |
| distinguished from that entity by the fact that the LLC, | | | | partners. He should account to the LLP any profit or |
| while having a legal existence independent of its | | | | benefit derived in the conduct and winding up of the |
| Members is not technically a corporate body because | | | | LLP activities or use of property and should refrain |
| its legal existence is time limited and therefore not | | | | from competing with the LLP in the conduct or winding |
| "continuing". | | | | up of the LLP.o A partner's economic rights in the LLP |
| Limited liability partnerships were introduced in Japan in | | | | are freely transferable. A transfer in whole or in part |
| 2005 during a large-scale revamp of the country's | | | | of a partner's transferable interest is permissible and |
| laws governing business organizations. Japanese LLPs | | | | does not by itself cause the partner's disassociation or |
| may be formed for any purpose (although the purpose | | | | a dissolution and winding up of the LLP. The transfer |
| must be clearly stated in the partnership agreement | | | | does not entitle the assignee to participate in the |
| and cannot be general), have full limited liability and are | | | | management or conduct of the LLP's activities nor |
| treated as pass-through entities for tax purposes. | | | | access to information concerning the LLP's |
| However, each partner in an LLP must take an active | | | | transactions.o Winding up of an LLP may be either |
| role in the business, so the model is more suitable for | | | | voluntary or by the Company Law Tribunal.o |
| joint ventures and small businesses than for | | | | Dissolution: An LLP can be dissolved by agreement of |
| companies in which investors plan to take passive | | | | the members. When LLP becomes insolvent, creditors |
| roles. Japanese LLPs may not be used by lawyers or | | | | can initiate winding up proceedings. In the winding up of |
| accountants, as these professions are required to do | | | | LLP, past and present members are liable to contribute |
| business through an unlimited liability entity. | | | | to the extent they have agreed to do in the LLP |
| A Japanese LLP is not a corporation, but rather exists | | | | agreement. |
| as a contractual relationship between the partners, | | | | Conclusion: |
| similarly to an American LLP. A limited liability | | | | Need of a LLP: |
| partnership is a form of organisation which | | | | In an increasingly litigious market environment, the |
| PROTECTS a partner's assets from limitless liabilities. | | | | prospect of being a member of a partnership firm with |
| In LLP, every partner will be an agent of the | | | | unlimited liability is risky and unattractive. This makes |
| partnership and not of the other partners, | | | | LLP the most suitable vehicle for partnerships among |
| It promises perpetual succession and a distinct legal | | | | professionals, and puts them on a level-playing field |
| identity were it to become law. Further, it requires only | | | | with foreign professional firms. |
| a minimum of two partners, having no cap on the | | | | |