Limited Liability Partnership - A New Entity

Limited Liability Partnership, A New Beginning

The Indian Government may allow a new form of Legal Entity in India called as Limited Liability Partnership and the proposed change may be one of the key features in the forthcoming budget Limited Liability Partnership (LLP) has element of Partnership and Corporations. A limited partnership is a form of partnership similar to a general partnership, except that in addition to one or more general partners (GPs), there are one or more limited partners (LPs). The GPs are, in all major respects, in the same legal position as partners in a conventional firm, i.e. they have management control, share the right to use partnership property, share the profits of the firm in predefined proportions, and have joint and several liabilities for the debts of the partnership.

As in a general partnership, the GPs have actual authority as agents of the firm to bind all the other partners in contracts with third parties that are in the ordinary course of the partnership's business. Professionals and Investors across the world are initiating business via Limited Liability Partnership due to the following numerous advantage.
  • Easy to Form
  • Liability of all partner are Limited
  • Beneficial Tax planning
  • Partner’s has the right to manage business directly
  • Easy to dissolve
  • Little Compliances  as compared to Corporate ie Non maintenance of Statutory records and Minutes
  • Flexible Management Structure
  • Flexible Capital Structure

Mainly LLP is the most favored business model among professionals in law, accounting and financial services in the developed world.

Disadvantage of LLP are

  • Public Listing of LLP are not possible
  • Restriction on Ownership
  • Interest not as Freely Transferable
  • Limited merger opportunity
  • LLP and LLc are not available across every country of the world

In 2005, The Ministry of Company affairs has brought a concept paper on Limited Liability. In the Year 2006 the Limited Liability Partnership Bill was introduced in the Parliament. The Limited Liability Partnership Act is yet to be enacted.

Enactment of this act shall be the entry of one new legal structure and provide more flexibility to the entrepreneurs

 

Happy and Productive Surfing

Vinay Gupta

Author :Vinay Gupta FCA CS
Vinay is a qualified Chartered Accountant and head of Vinay Gupta and Co. He is a keen observer of Indian economic and taxation issues and write regularly for The Great Indian Bazaar. You can find more about him here


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