The Limited Liability Partnership Act of 2008 and the LLP Rules of 2009 established the recognized type of business organization known as the Limited Liability Partnership (LLP) in India. A limited liability partnership (LLP) is a type of partnership where each member only has certain obligations. It is a different type of corporate business structure that combines a partnership’s adaptability with a company’s limited liability. Even if the owners and partners change, the business still exists. Additionally, it is able to sign contracts and hold property in its name. The liability of each partner is only limited to their agreed-upon share of the LLP’s assets; the LLP is a separate legal entity and is fully liable for its assets.
In the case of a Limited Liability Partnership, either partner is protected from liability for the mistake, carelessness, or any wrong committed by the other partner. All of the partners’ rights and obligations are governed by the partnership agreement.
What is an LLP (Limited Liability Partnership)?
The Limited Liability Partnership Act of 2008 and the LLP Rules of 2009 brought the recognized business structure known as the limited liability partnership (LLP) to India. A partnership in which all of the members have restricted responsibilities is known as a limited liability partnership (LLP). It is a different type of corporate business structure that combines a partnership’s adaptability with a company’s limited liability. Even if the owners and partners change, the business still exists. It is also capable of holding property and signing contracts in its own name.
The responsibility of the partners is constrained to the amount of their agreed-upon investment in the LLP. Although it is a distinct legal entity, it is accountable to the full extent of its assets. In an LLP, one partner is not accountable or liable for the wrong, mistakes, or carelessness of another partner. In the case of the Limited Liability Partnership, an agreement between the partners, or, as the case may be, an agreement is formed between the partners and the entity, i.e., LLP, governs all of the reciprocal rights and liabilities or obligations of the partners within the entity.
However, in the event ofabsenteeism of such a contract, the LLP would be regulated by the guidelines set forth in Schedule I of the Limited Liability Partnership Act of 2008, which is basically outlining the partners’ respective rights andliabilities or obligations.
Additionally, any other legal structure of business, including a partnership which is created in accordance with Partnership Act of 1932, private limited company, and an unlisted public limited company, may convert to an LLP in accordance with the LLP Act’s rules and the proper legal procedures.
A Partnership Firm: What is the meaning of this?
The Indian Partnership Act, 1932’s guiding principles apply to partnership firms. The following are a partnership firm’s fundamental characteristics:
- A partnership or agreement between two or more people to split the gains and losses from a certain company or endeavor.
- The profit-sharing percentages of the partners are outlined in a separate legal document called a partnership deed.
- The partners in a partnership firm do not have any type of limited liability status. Therefore, if the partners want limited liability status and more freedom, converting the partnership to an LLP would be the best option.
Is it possible to change an LLP into a partnership firm?
No, it is not possible to change an established LLP into a partnership firm. The 2009 Limited Liability Partnership Rules make no mention of such a change. A variation of the partnership concept is the limited liability partnership. It is implemented by addressing the obstacles of traditional partnership types of company structure. The ability to change one’s own business into a partnership firm was eliminated by the lawmakers.
Why should I select an LLP instead of a partnership firm?
Such business owners typically choose an LLP when they want to operate in the traditional manner. In an LLP, partners are granted the benefit of limited liability up to the amount of their capital investment in the company. Additionally, name exclusivity is an option.
Why should I select a partnership firm instead of an LLP?
Such business owners choose to register a partnership firm because they value the yearly compliance obligations’ simplicity. Although an LLP is the evolution of a partnership business, it has more onerous yearly compliance requirements. And this makes the registration and carrying out of business easy and simple.
