The LLP is a separate legal entity, is liable to the full extent of its assets but liability of the partners is limited to their agreed contribution in the LLP.
As per LLP norms, no partner is liable on account of the independent or un-authorized actions of other partners, thus individual partners are shielded from joint liability created by another partner’s wrongful business decisions or misconduct.
Advantages of LLP form
LLP form is a form of business model which:
(i) is organized and operates on the basis of an agreement.
(ii) provides flexibility without imposing detailed legal and procedural requirements.
(iii) enables professional/technical expertise and initiative to combine with financial risk taking capacity in an innovative and efficient manner
Difference between LLP & "traditional partnership firm"
Under “traditional partnership firm”, every partner is liable, jointly with all the other partners and also severally for all acts of the firm done while he is a partner.
But under LLP structure, liability of the partner is limited to his agreed contribution.
Difference between LLP & a Company
(a) A basic difference between an LLP and a joint stock company lies in that the internal governance structure of a company is regulated by statute (i.e. Companies Act, 1956) whereas for an LLP it would be by a contractual agreement between partners.
(b) The management-ownership divide inherent in a company is not there in a limited liability partnership.
(c) LLP will have more flexibility as compared to a company.
(d) LLP will have lesser compliance requirements as compared to a company.
Committees, which have made recommendations for legislation on LLPs in India
Bhat Committee (1972);
Naik Committee (1992);
Expert Committee on Development of Small Sector Enterprises headed by Sh. Abid Hussain in 1997 and
Study Group on Development of Small Sector Enterprises (SSEs) headed by Dr. S P Gupta (2001).
Minimum and maximum number of partners
A minimum of two partners will be required for formation of an LLP. There will not be any limit of partners. to the maximum number
Some more facts of LLP :-
(a) Appointment of at least two “Designated Partners” shall be mandatory for all LLPs. “Designated Partners” shall also be accountable for regulatory and legal compliances.
(b) Every Designated Partner would be required to obtain a “Designated Partner’s Identification Number” (DPIN).
(c) The LLP structure is also available in countries like United Kingdom, United States of America, various Gulf countries, Australia and Singapore.