The Limited Liability Partnership Act, 2008

ACT CAME IN TO EXISTENCE ON March 31,2009

Object of the Limited Liability Partnership Act 2008

The LLP is viewed as an alternative corporate business vehicle that provides the benefits of limited
liability but allows its members the flexibility of organizing their internal structure as a partnership
based on a mutually arrived agreement. The LLP form would enable entrepreneurs, professionals
and enterprises providing services of any kind or engaged in scientific and technical disciplines, to
form commercially efficient vehicles suited to their requirements. Owing to flexibility in its structure
and operation, the LLP would also be a suitable vehicle for small enterprises and for investment by
venture capital.

What is Limited Liability Partnership?

LLP shall be a body corporate and a legal entity separate from its partners. It will have perpetual
succession. While the LLP will be a separate legal entity liable to the full extent of its assets, the
liability of partners would be limited to their agreed contribution.
The salient features of the Limited Liability Partnership Act, 2008, inter alia, are as follows:
(i) the LLP shall be a body corporate and a legal entity separate from its partners;
(ii) the mutual rights and duties of the partners of the LLP inter se and those of the LLP and its partners
shall be governed by an agreement between the partners inter se or between the LLP and the partners
subject to the provisions of the Act. The Act provides flexibility to devise the agreement as per their
choice. In the absence of any such agreement, the mutual rights and duties shall be governed by the
provisions of the Act;
(iii) the LLP will be a separate legal entity, liable to the full extent of its assets, with the liability of the
partners being limited to their agreed contribution in the LLP. No partner would be liable on account
of the independent or unauthorised actions of other partners or their misconduct. The liabilities of the
LLP and its partners who are found to have acted with intent to defraud creditors or for any
fraudulent purpose shall be unlimited for all or any of the debts or other liabilities of the LLP;
(iv) every LLP shall have at least two partners and shall also have at least two individuals as Designated
Partners, of whom at least one shall be resident in India.
(v) the LLP shall be under an obligation to maintain annual accounts reflecting true and fair view of its
state of affairs. A statement of accounts and solvency shall be filed by every LLP with the Registrar
every year. The accounts of LLPs shall also be audited, subject to any class of LLPs being exempted
from this requirement by the Central Government;
(vi) the Central Government shall have powers to investigate the affairs of a LLP, if required, by
appointment of competent inspector, for the purpose;
(vii) the compromise or arrangement including merger and amalgamation of LLPs shall be in
accordance with the provisions of the act;
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(viii) a firm, private company or an unlisted public company would be allowed to be converted into a
LLP in accordance with the provisions of the act.
(ix) the winding up of the LLP may be either voluntary or by the Tribunal to be established under the
Companies Act, 1956. Till the Tribunal is established, the power in this regard has been given to the
High Court;
(x) the act confers powers on the Central Government to apply provisions of the Companies Act, 1956 as
appropriate, by notification with such changes or modifications as deemed necessary. However, such
notifications shall be laid in draft before each House of Parliament for a total period of 30 days and
shall be subject to any modification as may be approved by both Houses;
(xi) the Indian Partnership Act, 1932 shall not be applicable to LLPs.

Nature of LLP

Hybrid of companies & Partnerships- Benefit of Limited Liability of Company and flexibility of
Partnership
Separate Legal Entity- Continue its existence irrespective of Changes in partners
LLP itself can enter into contracts and hold properties
Partners Liability limited to the agreed contribution
LLP concept exist in UK, US, Australia , Singapore & various gulf countries (Indian LLP act based on
UK LLP Act 2000 and Singapore LLP Act, 2005)
Professional & Non-professional (Businessmen) , both can set up LLP

Key Definitions

"Body Corporate" is defined to mean a company as defined under the Companies Act, 1956 and
includes LLP, LLP incorporated outside India, a foreign company but does not include a
corporation sole, a registered co-operative society and any other body corporate notified by the
Central Government (not being a company defined under the Companies Act, 1956 or LLP
defined under LLP Act). [Section 2(1)(d)].
"Business" includes every trade, profession, service and occupation. [Section 2(1) (e)].
"Financial Year", in relation to LLP, means the period from 1st April of a year to the 31st March
of the following year. However, in case of LLP incorporated after 30th September, financial year
may end on 31st March of the year next following that year. [Section 2(1) (l)].
"Foreign Limited Liability Partnership" means a LLP formed, incorporated or registered outside
India which establishes a place of business within India? [Section 2(1) (m)].
"Limited Liability Partnership" means a partnership formed and registered under LLP Act.
[Section 2(1)(n)].
"Limited liability partnership agreement" means any written agreement between the partners of
LLP or between the LLP and its partners which determines the mutual rights and duties of the
partners and their rights and duties in relation to that LLP. [Section 2(1) (o)].
"Partner" in relation to LLP means a person who becomes a partner in a LLP in accordance with
the LLP agreement. [Section 2(1)(q)]

LLP AGREEMENT
It is a written agreement between the partners of the limited liability partnership and 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.

It is not necessary to enter into an LLP agreement as per LLP Act,2008. In the absence of LLP
agreement, the mutual rights of partners & in relation to LLP will be determined as per schedule
I of the LLP Act, 2008.
Due to varied nature of different type of businesses, it may not be practically advisable to have
those standard clauses as mentioned in schedule 1. Therefore, it is advisable to have a legally
draft agreement
LLP Agreement must specify the amount of interest on capital to be paid on their contributions.
Profits and losses must be distributed to partners in the ratio of their capital contribution

MEMBERS & PARTNERS

Every limited liability partnership shall have at least two partners. The following persons
are disqualified from becoming partners:
Person of Unsound mind
Person who has applied to be adjudicated as insolvent and his application pending
Undischarged insolvent
There is no limit on the maximum no. of partners. According to Section 6(2) of the Act, the minimum
no. of partners should not drop below 2 at any point of time. If the minimum no. drops and still the
LLP carries on business for a period more than 6 months, the remaining partner, if he is aware of the
fact that the minimum no. of members has not been achieved, he is personally liable for the
obligations of the LLP during that period.
A DESIGNATED PARTNER
Designated Partner means any partner designated as such in Section No. 7 of the Act. According to
Section 7(1), every LLP must have two designated partners who are individuals. Out of the two
designated partners, at least one of them must be a resident in India. Resident means a person
who has stayed in India for not less than 182 days during the preceding one year. In case of an LLP
in which all the partners are bodies corporate or in which one or more partners are individuals and
bodies corporate, at least two individuals who are partners of such LLP or nominees of such bodies
corporate shall act as designated partners.
Every designated partner of a LLP shall obtain a Designated Partner Identification Number
(DPIN) from the Central Government and the provisions of sections 266A to 266G of the
Companies Act, 1956 shall apply mutatis mutandis for the said purpose.
If an LLP contravenes the provision of Section 7(1), then the LLP and its every partner shall be
punishable with a fine, which is not less than Rs. 10,000 but not more than Rs. 500,000.
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Responsibilities of designated partners:

The designated partner is responsible for all acts to be performed under the LLP Act like filing of
documents, returns, statements, those mentioned in the LLP Agreement and penalties for noncompliance.

Registering the LLP with the Registrar

Appointing an auditor - if one is needed
Preparing and signing the accounts on behalf of the members
Delivering the accounts to the Registrar
Notifying Registrar of any membership changes, or of a change to the registered office address
or name of the LLP
Preparing, signing and delivering the annual return to the Registrar
Acting on behalf of the LLP if it is wound up and dissolved
Hence designated members generally face more responsibilities as compared to ordinary
members.

THE INCORPORATION & REGULATORY FORMS

There are specific guidelines given by the Limited Liability Partnership Act, 2008, towards the
incorporation of an LLP. Incorporation procedure is similar to that of a Company. For a limited
liability partnership to be incorporated:
Name of LLP: The name of LLP must end with the word Limited Liability Partnership or LLP.
Under similar lines of regulation for a company, an LLPs name should not resemble the name of an
existing LLP. In case the name contains the words Company Secretary / Cost Accountant / Chartered
Accountant, etc., the same should be allowed only after obtaining approval from the Council
governing institute or any other authority specified by the government. Section 16, of the LLP Act,
2008, specifies that the application for reservation of name should be made in Form No.1 to the
Registrar having Jurisdiction over the registered office of the LLP. The reservation of the name is
valid for 3 months within which the person incorporating the LLP must file all documents relevant
for incorporation.
Registered office of LLP need not be the same place where the business is conducted. LLP may give
another address for service of documents within the jurisdiction in which registered office is situated.
Form No. 12 should be submitted within 30 days for intimating the above address.
Two or more persons associated for carrying on a lawful business with a view to profit shall subscribe
their names to an incorporation document.
The incorporation document should be filed with the Registrar of the State in which the registered
office of the limited liability partnership is to be situated in the prescribed manner and fees.
Along with the incorporation document, a statement in the prescribed form, made by either an
advocate, or a Company Secretary or a Chartered Accountant or a Cost Accountant, who is engaged
in the formation of the limited liability partnership and by anyone who subscribed his name to the
incorporation document, that all the requirements of this Act and the rules made there under have
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been complied with, in respect of incorporation and matters precedent and incidental thereto. The
incorporation document shall state:

The name of the LLP

The proposed business of the LLP
The address of the registered office of the LLP
The names and addresses of each person who are to be partners of the LLP on incorporation.
The names and addresses of each person who are to be designated partners of the LLP on
incorporation.
The limited liability of the partnership

LLP agreement must be filed in Form No. 3 and Notice of appointment of Partner and designated
partner in Form No. 4 should be filed at the time of Filing Form No. 2 or within 30 days of
incorporation.
The Registrar shall within fourteen days of filing, register the incorporation document and gives a
certificate that the LLP has been incorporated.

Contribution by partner [Sections 32 and 33]

A contribution of a partner to the capital of LLP may consist of any of the

tangible, movable or immovable property

intangible property
Other benefit to the LLP including money, promissory notes, contracts for services performed or
to be performed.
The obligation of a partner for the contribution shall be as per the LLP agreement.

Creditor, which extends credit or acts in reliance on an obligation described in the LLP agreement,
without the notice of any compromise made between the partners, may enforce the original
obligation against such partner.
USERS OF LLP
India has witnessed considerable growth in services sector and the quality of our professionals is
acknowledged internationally. It is necessary that entrepreneurship knowledge and risk capital
combine to provide a further impetus to our impressive economic growth. Equally the services sector
promises an economic opportunity similar to that provided by information technology over the past
few years. It is likely that in the years to come Indian professionals would be providing accountancy,
legal and various other professional/technical services to a large number of entities across the globe.
Such services would require multidisciplinary combinations that would offer a menu of solutions to
international clients. In view of all this, the LLP framework could be used for many enterprises,
such as:

Persons providing services of any kind

Enterprises in new knowledge and technology based fields where the corporate form is not
suited.

For professionals such as Chartered Accountants (CAs), Cost and Works Accountants (CWAs),
Company Secretaries (CSs) and Advocates, etc.
Venture capital funds where risk capital combines with knowledge and expertise
Professionals and enterprises engaged in any scientific, technical or artistic discipline, for any
activity relating to research production, design and provision of services.
Small Sector Enterprises (including Micro, Small and Medium Enterprises)
Producer Companies in Handloom, Handicrafts sector

BENEFITS, HENCE THE DIFFERENCES

L

P r i
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B e
n e f
i t s

i m

i t e d

o u b l e

i a b i l i t y

a n a g e m

a x e s

e r p e t u a l

&

e n t

P r o p e r t y

u c c e s s i o n

Liability LLPs have a limited liability, which means each partner is responsible only for the money he
has given or promised in the agreement, and each partner is not personally liable. Whereas, in an
ordinary partnership, the partners are jointly and personally liable for the debts of the firm. Hence
this gives LLPs an edge over partnership as it is more secure and less financially risky.
Management LLPs have a significant advantage over companies in view of management. In
companies, shareholders hold shares in a company and appoint a board of directors, who in turn
make the executive decisions of the company. Whereas, LLPs avoid unnecessary steps by allowing
each partner to directly run / control and own a portion of the partnership.
Profits, taxed twice - Profits from corporations are subjected to "double taxation," whereby the income
from the corporation is taxed, as are the profits distributed to shareholders, while partnerships are not
subject to this double taxation.
Perpetual succession An LLP is a body corporate and a legal entity which has perpetual succession
and is separate from its partners. The liability of its partners is limited to their agreed contribution to
the LLP. Furthermore, the concept of joint and several liability is done away with and no partner is
liable on account of independent or unauthorized actions of the other partners.
Purchase of property Like a company, LLPs have an advantage over ordinary partnerships, as they
can purchase movable and immovable property in their own name. The firm / body corporate have
ownership of assets and partners only have capital contribution.

Hence, the various attributes of the LLP structure such as lower compliance costs, flexibility in
operations, better control over management and limited liability make it an attractive alternative.
SR
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N
O.
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LIMITED LIABILITY
PARTNERSHIP ACT, 2008

PARTNERSHIP ACT,
1932

Registration
Creation
Separate Legal
Entity

Compulsory
Created by law
It is separate legal entity,
separate from its partners\
designated partners.

Perpetual
succession
Purchase of
Property
Common Seal

Yes.

Optional
Created by contract
It is not separate legal
entity from partners.
Partners are
collectively referred as
firm.
No.

PARTICULARS

Formalities of
Incorporation

Expenses for
formation

19

Legal Proceeding

10

Name

11

Change of name

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Liability

LLP can purchase property

in its name
It denotes the signature of
the Company and LLP may
have its own common seal,
if it besides to have one.
Various documents /
declarations executed in
prescribed formats prefilled in designated e-forms
are required to be filed with
ROC along with filing fee.
Minimum Statutory fee for
incorporation of LLP is Rs.
1500/- and Maximum fee
for incorporation of LLP is
Rs. 7000/- (approx.)
LLP can also sue and be
sued
Suffix LLP or Limited
Liability Partnership has to
be added to the name.
The name of the LLP can be
changed with the prior
approval of Central
Government.
Liability of partners is
limited upto their capital

Cannot purchase
property in its name
Not required

Partnership deed
along with form/
affidavit required to be
filed with Registrar of
firms along with
requisite filing fees.
Minimum Statutory
Fee does not exceed
to Rs. 500/- and
Maximum Statutory
Fee is Rs. 5000/Only registered
partnership can sue.
No such requirement.

The name of the

Partnership firm can
be changed
Liability of partners is
unlimited
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contribution
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Agency
Relationship

Partners are agents of LLP

14

Contracts /
Business
transaction by
Member/
Directors/ Partners
Power of Member\
Partner\ Director

A partner can enter into

contract with the LLP

16

Dissolution by an
act of partners /
members /
directors

Continuance of LLP is not

affected by the acts of its
Partners.

17

Jurisdiction of
Company Law
Board
Compromise \
arrangements \
merger \
amalgamation

CLB has jurisdiction over

the affairs of the LLP

19
20

Books of Accounts
Filing of Annual
Accounts

21

Audit of Accounts

Needs to be maintained.
Statement of accounts and
solvency are required to be
filed with ROC annually in
the prescribed format.
As per the provisions of LLP
act, accounts to be audited
annually except for LLPs
having turnover less than
Rs. 40 lacs or Rs. 25 lacs
contribution in any financial
year.

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18

The power of partners/

designated partners to
conduct the day to day
affairs is specified by LLP
agreement / LLP act.

Provisions exist for

Compromise \
arrangements \ merger \
amalgamation for LLP in the
act.

Partners are agents of

the firm and each
other
A partner can not
enter into contract
with the firm

All the partners have

say in the day to day
management of the
firm or as specified in
the partnership deed if
there is any
Partnership contract
can be put to an end
by anyone of the
members \ on
happening of event
specified in Act
CLB has no jurisdiction

There is no provision
for Compromise \
arrangements \
merger \
amalgamation in the
Partnership firm.
Not applicable
Not applicable

The Audit of accounts

is as per the
provisions of income
tax act.

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Mode of Service
documents

23
24

Annual Return
Director
Identification
Number /
Designated
Partner
Identification
Number
Minimum Number
of Member
Maximum number
of Member

25
26

Documents to be served on
LLP / designated partners
may be served through
electronic means
Must be filed annually
Each Designated partner
required to have a DPIN
before being appointed as a
Designated Partner of LLP.

Service of documents
can not be served
through electronic
means
Not applicable
No such requirement

Minimum two partners

Minimum two partner

No cap of maximum
number of its partners

Maximum 10 for
banking business and
20 for other business.
No cap on the
minimum number of
Managing partner
Partnership Deed is a
charter of the firm
which denotes its
scope of operation.

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Designated
partner

Minimum two designated

partner

28

Memorandum and
Articles of
Association \
Partnership deed/
Partnership
Agreement
Meetings

LLP Agreement is a charter

of the LLP which denotes its
scope of operation.

29

30

Publication of
name

31

Minutes

32

Voting Rights

33

Admission as
partner/ member

Meeting of the Designated

Partners have to be held at
specific time period as per
the Provisions of LLP Act.
The full name of the
company and address of
the registered office and a
statement that it is
registered with limited
liability.
Decisions taken in meetings
must be recorded as
minutes with in 30 days
Each partner has only one
vote
A person can be admitted
as a partner with the
consent of all the partners.

No such requirement

Not applicable

Not applicable

Not applicable
A person can be
admitted as a partner
with the consent of all
the partners.
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Partners and their relations and extent of liability [Sections 22 to 31]

Mutual rights and duties of partners of an LLP inter se and those of the LLP and its partners shall be
governed by an agreement between the partners, or agreement between the LLP and its partners. In
absence of any such agreements, the mutual rights and duties shall be governed by the LLP Act.
Every partner of a LLP is, for the purpose of the business of LLP, the agent of LLP, but not of other
partners.
LLP, being a separate legal entity, shall be liable to the full extent of its assets whereas the liability of
the partners of LLP shall be limited to their agreed contribution in the LLP.
LLP is not bound by anything done by a partner in dealing with a person if
the partner in fact has no authority to act for the LLP in doing a particular act; and
the person knows that he has no authority or does not know or believe him to be a partner of
the LLP
LLP is liable if the partner of a LLP is liable to any person for wrongful act/omission on his
part in the course of business of LLP/with its authority
Obligation of LLP whether arising in contract or otherwise, shall solely be the obligation of
LLP. Liabilities of LLP shall be met out of properties of LLP.
Partner is not personally liable for the obligations of LLP solely by reason of being a partner of
LLP.
No partner is liable for the wrongful act or omission of any other partner of LLP, but the partner
will be personally liable for his own wrongful act or omission.
The liability of the LLP and partners who are found to have acted with intent to defraud creditors
or for any fraudulent purpose shall be unlimited for all or any of the debts or other liabilities of
the LLP.
Cessation of a partner on grounds like resignation, death, dissolution of LLP, declaration that a
person is of unsound mind, declared/applied to be adjudged as insolvent etc. will not be effective
unless
the person has notice that the partner has ceased to be so
notice of cessation has been delivered to ROC.
The notice of cessation may be filed by the outgoing partner if he has reasonable cause to believe that
LLP has not file the said notice.

Foreign LLP [Section 59 and Rule 34]

On establishment of a place of business in India, foreign LLP are required to file prescribed documents
for registration with ROC within 30 days of the establishment in India. Any alteration in the
constitution documents, overseas principle office address and partner of foreign LLP are required to
be filed with the ROC in the prescribed form within 60 days of the close of the financial year.
Any alteration in the certificate of registration of foreign LLP, authorized representative in India and
principle place of business in India are required to be filed with the ROC in the prescribed form
within 30 days of alteration.

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Foreign LLP ceasing to have a place of business in India, are required to give notice to ROC in the
prescribed form within 30 days of its intention to close the place of business and from the date of
such notice, the obligation of
Foreign LLP to file any document with the ROC shall cease, provided it has no other place of business
in India and it has filed all the documents due for filing as on the date of the notice.
Conversion of partnership firm/private company/unlisted public company into LLP [Sections 55 to 58,
Second, Third and Fourth Schedules]
GOI has, on May 22, 2009, notified provisions relating to conversion of

a partnership firm as defined under the Indian Partnership Act,1932 into LLP;

a private limited company into LLP;

an unlisted public company into LLP.

Second, Third and Fourth Schedules to the LLP Act contain provisions relating to conversion of a
partnership firm into LLP, a private limited company into LLP and unlisted public company into
LLP, respectively.
Eligibility for conversion:
Firm into LLP: Firm can be converted into LLP if all the partners of firm become the partners of LLP
and no one else.
Company into LLP: Private limited company/unlisted public company can be converted if and only if (a) There is no security interest in its assets subsisting or in force at the time of application for
conversion; and
(b) All the shareholders of the company become partners of LLP and no one else.
For conversion of firm/private limited company/unlisted public company into LLP, the partners of the
firm/shareholders of company are required to file a statement and incorporation documents in the
prescribed form with the ROC.
On receiving the documents for conversion, ROC shall register the documents and issue certificate of
registration specifying the date of registration as LLP. Upon registration by ROC, LLP shall intimate
Registrar of Firm [ROF]/ROC, as the case may be, about conversion within 15 days of registration.
On and from the date specified in the certificate of registration issued by ROC
all tangible (movable/immovable) & intangible property, liabilities, interest, obligation etc. relating to
the firm/private limited company/unlisted public company and the whole of the undertaking of the
firm/private limited company/unlisted public company, shall be transferred to and shall vest in the
LLP without further assurance, act or deed.
Firm/private limited company/unlisted public company shall be deemed to be dissolved and removed
from the records of ROF/ROC, as the case may be.

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If any property/rights, etc. of the partnership firm/private limited company/unlisted public company is
registered with any authority, LLP shall take steps to notify the authority of the conversion.
Upon conversion, following things/events in favour of or against the firm/private limited
company/unlisted public company on the date of registration may be continued, completed and
enforced by or against the LLP:
all proceedings, conviction, ruling, order or judgment of any Court, Tribunal or other authority
pending in any Court or Tribunal or before any authority on the date of registration
every agreement irrespective of whether or not the rights and liabilities thereunder could be assigned,
deeds, contracts, schemes, bonds, agreements, applications, instruments and arrangements
every contract of employment
appointment in any role or capacity
Any approval, permit or license issued under any other Act, etc.
In case of a firm, every partner of a firm which is converted into a LLP shall continue to be personally
liable (jointly and severally with LLP) for the liabilities and obligations of the firm incurred prior to
the conversion or which arose from any contract entered into prior to the conversion. In case any
such partner discharges any such liability or obligation he shall be entitled (subject to any agreement
with the LLP to the contrary) to be fully indemnified by LLP in respect of such liability or
obligation.
For a period of 12 months commencing on or before 14 days from the date of registration, LLP shall
ensure that every official correspondence of LLP bears the following:
A statement that it was, as from the date of registration, converted from a firm/private limited
company/unlisted public company into a LLP; and
The name and registration number, if applicable, of the firm/a private limited company/an unlisted
public company from which it was converted.

Winding-up of LLP [Sections 63 and 64]

LLPs may be wound-up either voluntarily or by NCLT. LLP may be wound up by NCLT if
LLP decides to wound up by NCLT;
Number of partners is reduced below 2 for a period of more than 6 months;
LLP is unable to pay its debts;
LLP has acted against the interests of the sovereignty and integrity of India, the security of the State
or public order;
LLP has defaulted in filing Statement of Account and Solvency or annual return with the ROC for 5
consecutive financial years; or
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 NCLT is of the opinion that it is just and equitable that the LLP be wound up In January 2010, MCA
had notified that certain provisions relating to winding-up of a company under the Companies Act,
1956 will also be applicable to a LLP. The notification also provides details of modification in the
provisions of the Companies Act relating to winding up for its applicability to winding up of LLP
under the LLP Act. Subsequently, on 30 March 2010, issued Limited Liability Partnership (Winding
up and Dissolution) Rules, 2010.

Miscellaneous provisions
The Central government has been empowered to apply any of the provisions of the Companies Act,
1956 to LLPs with suitable changes or modification. [Section 67]
ROC may strike off the name of LLP from the register of LLP if LLP is not carrying on business or its
operation, in accordance with the provisions of LLP Act in the manner prescribed. [Section 75]
Forms/documents required to be filed under the LLP shall be filed in electronic form online on the LLP
portal duly authenticated by the partner/designated partner with a digital signature and further
attested by the practicing chartered accountant/company secretary/cost accountant whenever
required. [Section 68]
Presently all the provisions of the LLP Act, other than those relating to winding-up and dissolution of
LLP and appellate provisions to be exercised by NCLT and National Company Law Appellate
Tribunal [NCLAT], have been brought into force.

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