Limited Liability Partnership is a combination of a company and a partnership firm. It has the limited liability of a company and flexibility of a partnership. An LLP is governed by the provisions of the Limited Liability Partnership Act, 2008. The purpose for the introduction of this new form of business entity is to provide a structure best suited for small businesses that are willing to obtain legal recognition but doesn’t wish to divide the control or management.
LLP enjoys the benefits of a company such as perpetual succession, separate legal entity and limited liability. An LLP can continue its existence irrespective of change in the partners. It can hold property in its own name and can enter into contracts in its own name. It can sue/ can be sued in its own name. The compliance requirements of LLP are quite less as compared to the compliance requirements of a company.
Liabilities of Partners
The liabilities of the partners are only to the extent of contribution they have agreed upon in the agreement. A partner cannot be held liable for the independent or wrongful actions of the other partners.
Rights & Duties of Partners
The mutual rights and duties of the partners are governed by the LLP agreement entered between the partners at the time of incorporation. The right and duties of all the partners and the LLP are also governed by the very same agreement.
Advantages of LLP
- Easy to Incorporate
- Limited Liability of Partners
- Taxation Benefits
- Separate Legal Entity
- Perpetual Succession
Difference between LLP and Company
- The vary difference between a LLP and Company is that a LLP is governed by the provisions of Limited Liability Partnership Act, 2008 whereas a company is governed by the provisions of Companies Act, 2013.
- The management and ownership is not generally with the same person in a company whereas in the case of a LLP the management and ownership is with the partners of the LLP,
- LLP is more flexible as compared to a company.
- The compliance requirements of a LLP are quite less as compared to a company.
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