Limited Liability

Partnership Act, 2008

Introduction

 The concept of LLP combines the limited liability

and separate legal entity of the corporate form
with the freedom and flexibility of the partnership
form.
 It is a hybrid form of organization.
 A Limited Liability Partnership is a body-corporate
created through the process of registration and
looks like a partnership in its external form.
 LLP Act, 2008
 Sec.2(n): Limited liability partnership means a
partnership formed and registered under this Act.
Features of Limited Liability Partnership
 Body corporate: an artificial person created through a
process of law body corporate formed and registered under the LLP Act
 Separate legal entity legal entity separate from that of its partners. Sue and be sued
not only by the outsiders but by its own partners also.

 Incorporation
Perpetual succession
Any change in the partners of LLP shall not effect the existence, rights or liabilities of the LLP. life of an LLP does
 not depend upon the death, insolvency, retirement or insanity of the partner or partners provided the number of
partners if not reduced below two.

 Artificial legal person

 Limited liability of partners LLP would be liable fully for its acts to the extent of its assets. Partners- liable to the extent
of their agreed contributions. However, in some cases the liability of the partners can be
unlimited.

 Lawful business
 Partnership Act not applicable-No mutual agency
 LLP Act, 2008
 Features of Limited Liability Partnership
 Managed by partners: The management group shall
consist of the partners. Among the partners, at least
two partners, termed as ‘designated partners’, would
perform the role of compliance that directors have in a
company (Sec.7).
 LLP Act, 2008
 Features of Limited Liability Partnership
 Managed by partners: The management group shall
consist of the partners. Among the partners, at least
two partners, termed as ‘designated partners’, would
perform the role of compliance that directors have in a
company (Sec.7).
 Number of members: The minimum number of partners
required is two. There is no limit on the maximum
numbers.
 LLP Act, 2008
 Features of Limited Liability Partnership
 Managed by partners: The management group shall
consist of the partners. Among the partners, at least
two partners, termed as ‘designated partners’, would
perform the role of compliance that directors have in a
company (Sec.7).
 Number of members: The minimum number of partners
required is two. There is no limit on the maximum
numbers.
 Members’ profile: The members of an LLP may be
individuals and body corporates such as LLPs and
companies.
 LLP Act, 2008
 Features of Limited Liability Partnership
 Managed by partners: The management group shall
consist of the partners. Among the partners, at least
two partners, termed as ‘designated partners’, would
perform the role of compliance that directors have in a
company (Sec.7).
 Number of members: The minimum number of partners
required is two. There is no limit on the maximum
numbers.
 Members’ profile: The members of an LLP may be
individuals and body corporates such as LLPs and
companies.
 Simplicity: the formation and governance is simpler
than company.
Small LLP Sec 2 (1) ta

 The Limited Liability Partnership (Amendment) Act,

2021 had amended the Limited Liability
Partnership Act, 2008, and has introduced the
concept of "small LLP" and "start-up LLP".
 The main objective behind the introduction of this
new class of LLP is to aid small LLP businesses in the
ease of doing business in India. The Government
has taken various steps in recent years to ease out
the difficulties faced by the businesses in India.
 This new concept came into effect from 1st April,
2022
Small LLP Sec 2 (1) ta

 According to this amendment act, a small Limited Liability

Partnership(small LLP) means any LLP
 Whose contribution is less than Rs. 25,00,000 or other higher
amount (not exceeding Rs. 5,00,00,000) that may be
prescribed; and
 Whose turnover for the preceding financial year does not
exceed Rs. 40,00,000 or other higher amount (not exceeding
Rs. 50,00,00,000) that may be prescribed; or
 Which meets such other requirements as prescribed from time
to time.
Further, startup LLPs have not been defined by the government in
this amendment act.
The basic advantage of this classification will be that these
classes of LLPs may get exemption from various disclosures,
audits, reduced ROC filing requirements, and other benefits that
will be announced by the government.
Advantages of Small LLP
Advantages of Small LLP

 2. Audit of Accounts: The accounts of every LLP

shall be audited in accordance with Rule 24 of
LLP, Rules 2009.
 Such rules, inter-alia, provides that any LLP, whose
turnover does not exceed, in any financial year,
forty lakh rupees, or whose contribution does not
exceed twenty-five lakh rupees, is not required to
get its accounts audited.
 Consequently, the provisions of Audit are not
functional on the new concept of Small LLP’s.
Fundamentally the Small LLP doesn’t require to
engage any professional and is qualified to prepare
its financial statement merely with the signatures of
Designated Partners.
Advantages of Small LLP

 3. Lesser ROC fees; Apart from the additional fees,

the ROC fees for forms like For Filing, registering or
recording notice of appointment, cessation,
change in name, address, designation of partner
or designated partner, intimation of DPIN &
Consent to become partner/designated partner
in Form 4 are also lesser than that of non-Small
LLP’S.
 LLP Act, 2008
 Limited Liability Partnership Agreement
LLP Agreement
 Sec.2(o) says, “Limited liability partnership agreement”
means any written agreement between the partners of
the limited liability partnership or between the limited
liability partnership and its partners which determines
the mutual rights and duties of the partners and their
rights and duties in relation to that limited liability
partnership.
 Where the partners do not make any agreement at all
or make an agreement but do not include in it terms on
some matters, then the First schedule of the Act wholly
or partly shall serve the purpose of the agreement.
 Read ‘first schedule’
 Composition of LLP
 LLP is constituted by a group of members called partners.
Who may be a partner (Sec.5)
 Any individual or body corporate may be a partner in a limited
liability partnership.
Disqualifications for individual: 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.
Position of minor: A minor cannot become member of an LLP. as the
LLP Act, 2008 is silent on the matter.
 Composition of LLP
Body corporate as member:
 i) a company as defined in the relevant Companies
Act in force;
 ii) a limited liability partnership registered under this Act;
 iii) a limited liability partnership incorporated outside
India ; and
 iv) a company incorporated outside India.
The following, however, are excluded from this category:
 i) A corporation sole (an individual constituted as a
corporation in respect of some office held by him, such
as a public trustee, the Crown etc);
 ii) A co-operative society registered under any law for
the time being in force;
 Composition of LLP
 iii) A Hindu undivided family (HUF) not being a body
corporate;
 iv) A partnership firm; not a body corporate
 v) Any other body corporate (not being a company or
an LLP), which the Central Government may, by
notification, specify in this behalf.
 But, a trust being a body corporate can be a member
and trustee as its nominee
 Foreign nationals can be partners in an Indian LLP and
they have to pass through necessary precautionary
procedures. Over time, the participation of foreigners in
Indian business activity is being facilitated.
Minimum Number of
Partners- Sec 6
 Every limited liability partnership shall
have at least two partners. There is no
limit on the maximum number of partners.
Minimum Number of
Partners
 Every limited liability partnership shall have at least
two partners. There is no limit on the maximum
number of partners.
 Number reduced to one: If at any time the
number of partners is reduced below two and the
business is carried on for more than six months
while the number is so reduced, the person, who is
the only partner of the partnership during the time
that it so carries on business after the six months
and has the knowledge of this fact that it is
carrying on business with him alone, shall be liable
personally for the obligations of the limited liability
partnership incurred during that period.
How to become partner
(Sec.22)
A person can become a partner in two ways:
 i) By subscribing his name to the
incorporation document, and
 ii) By fulfilling the procedure to be admitted
as partner in accordance with the Limited
Liability Partnership agreement.
A body corporate may also be an original
subscriber to the incorporation document
through its authorised signatory. The first partners
in the LLP are the signatories to the
Incorporation document. Afterwards, a person
may become a partner by an agreement with
other partners.
Advantages of LLP

 Limited liability
 Membership flexible
 Professional look
 Perpetual existence
 Incorporation simple
 Partners less burdened
 Flexibility in management
 Compliance easier
Advantages of LLP

 Separate property
 Protection of name
 Good for professionals
 On-line operations
 Taxation
Disadvantages of LLP

 Time consuming
 Lack of Secrecy
 No access to public money
 Transfer of ownership is difficult
Designated Partners

 Of the total partners in the LLP, at least two have

to be given the status of what has been called in
the Act, the ‘designated partners’. Their primary
role is to act as Compliance officers of LLP.
 A Limited Liability Partnership shall be managed
by all the partners or a specified group of
partners. Out of all the partners of the LLP, any
two have to be necessarily appointed as
‘Designated partners’.
Designated Partners

 According to Sec 2 (1) (j) of the Act, the term designated partner means any
partner designated as such pursuant to Sec 7 of the Act.
Main provisions (Sec.7):
The following provisions have been laid down in respect of designated partners:
 i) Every limited liability partnership shall have at least two designated partners and
they have to be individuals. At least one of them shall be a resident in India.
 ii) In case of a limited liability partnership in which all the partners are bodies
corporate or in which one or more partners are individuals and also bodies
corporate, there will have to be at least two individuals to act as designated
partners who are partners of such limited liability partnership or nominees of such
bodies corporate.
 iii) If the incorporation document specifies who are to be designated partners, such
persons shall be designated partners on incorporation.
 iv) If the incorporation document states that each of the partners from time to time
of limited liability partnership is to be designated partner, every partner shall be a
designated partner always.
 v) During the life-time of the LLP, any partner may become a designated partner by
and in accordance with the limited liability partnership agreement. If there are only
two partners, then both will have to become designated partners.
Designated Partners
 vi) A partner may cease to be a designated partner in accordance with
limited liability partnership agreement.
 vii) An individual can become a designated partner in any limited liability
partnership only after he has given his prior consent to act as such to the
limited liability partnership in the prescribed form and manner.
 viii) Every limited liability partnership shall file with the registrar the
particulars of every individual who has given his consent to act as
designated partner in the prescribed manner within 30 days of his
appointment.
 ix) An individual eligible to be a designated partner shall satisfy the
prescribed additional conditions and requirements.
 x) Every designated partner of a limited liability partnership shall obtain a
Designated Partner Identification Number (DPIN) from the Central
Government and the relevant provisions of the Companies Act, 2013
shall apply for the said purpose.
With effect from July 9, 2011, the DPIN has been integrated with the DIN
(Director Identification Number) issued under the Companies Act. Now, only
DIN are issued to the directors and designated partners.
Disqualifications for a
designated partner (Rule 9)
A person shall not be capable of being appointed as a designated
partner of a limited liability partnership:
 a) if he has been adjudged insolvent at any time within the
preceding five years; or
 b) if he suspends, or has at any time within the preceding five
years suspended payment to his creditors and has not at any time
within the preceding five years made, a composition with them; or
 c) if he has been convicted by a court for any offence involving
moral turpitude and sentenced in respect thereof to imprisonment
for not less than six months; or
 (d) if he has been convicted by a court for an offence involving
Sec.30 of the Act which deals with fraudulent behaviours.
The Central Government may remove the disqualification incurred by
any person by virtue of clause (a) or (b) given above either generally
or in relation to one or more specified limited liability partnerships.
Role of Designated
partner (Sec.8)
In the functioning of the LLP, a designated partner is
responsible for the following:
 i) A designated partner shall be responsible for the
doing of all acts, matters and things as are
required to be done by the limited liability
partnership in respect of compliance of the
provisions of this Act including filing of any
document, return, statement etc pursuant to the
provisions of this Act and as may be specified in
the limited liability partnership agreement.
 ii) A designated partner shall be liable to all
penalties imposed on the limited liability
partnership for any contravention of those
provisions.
Changes in designated
partners (Sec.9)
 Where a vacancy has been caused by
whatever reason, the limited liability
partnership may appoint a designated
partner within 30 days of the vacancy. All the
provisions regarding filing of particulars with
the Registrar or qualifications for the
appointment shall apply in respect of such
new designated partner.
 If no designated partner is appointed, or if at
any time there is only one designated
partner, each partner shall be deemed to be
a designated partner. This provision will apply
where the number of designated partners is
less than two.
 Important: do the difference between LLP,
Partnership Firm and company,