LA-11 (LLP Act) SDF

LIMITED LIABILITY PARTNERSHIP
ACT 2008
THE NEED FOR LLP ACT
• Unlimited liability imposed on partners in a traditional

Partnership deed as envisaged under Indian Partnership Act
1932.
• Enactments made in UK & other western countries, giving
legality to LLP.
• To have an alternate Corporate body.
TRADITIONAL PARTNERSHIP
• It is a relation between persons who have decided to share

profits/losses carried on by all of them or any of them acting for all.
• There is an agreement between the partners, which may be oral or in
writing. When written, it forms the Partnership deed.
• Minimum of two persons. Though Partnership act does not specify an
upper limit on number, the Companies Act 1956 makes it illegal to
have partnership exceeding 10 persons for a Banking firm & 20 for
other business.
• The body registered under Indian partnership act is called a
Partnership Firm.
PARTNERSHIP--PROVISIONS
• For a partnership to exist, it is essential that there must be

some business being carried on
• Sharing of profits either equally or in any agreed
proportion.
• Existence of mutual agency between partners.
• Partnership firm is not a separate legal entity
• It has no perpetual succession.
• Registration is not compulsory.
LIMITED LIABILITY PARTNERSHIP
• Enacted on 7th January 2009.Government has notified the rules

of LLP on 1st April 2009.
• Traditional partnership exposes partners to unlimited liability
while LLP statutorily limits liability of partners.
• Alternate to a registered Corporate, allowing flexibility for
members to organize their internal structure.
• LLP means a partnership formed and registered under LLP Act.
It is a legal entity separate from its partners having perpetual
succession.
LLP
• Any change in partners in an LLP does not affect the existence

or rights/liabilities of the partnership.
• Provisions of Indian Partnership Act 1932 does not apply.
• Capacity to become a partner---Same a capacity to
contract(sound mind/solvency etc)
• LLP must have minimum of 2 partners. If any LLP carries on
business for >6 months without the minimum number (with
the knowledge of remaining partner) then he/she would have
personal liability for transactions during this period.
KEY DEFINITIONS
• A body corporate is a Company as defined under Companies

act 1956 & it includes LLP.
• An LLP formed/incorporated/registered outside India which
establishes a place of business in India is a foreign LLP.
• Limited liability partnership means a partnership formed &
registered under LLP Act.
• Limited liability partnership agreement means a written
agreement between partners of LLP or between LLP and its
partners which determines mutual rights & duties as well as
their rights & duties in relation to the LLP.
NATURE OF LLP & DPIN
• LLP is a body corporate formed & incorporated under LLP Act.

• It is a separate legal entity & has perpetual succession.
• Minimum two partners are required for LLP who may be
individuals/body corporates.
• Every LLP needs to have at least two ‘Designated Partners’(DP) who
are individuals and at lease one of them must reside in India. If the LLP
has only corporate bodies as partners, then their nominees shall act
as DP.
• Designated partner is responsible for compliance under LLP act & is
required to obtain Designated Partner Identification Number(DPIN)
from the central Government
INCORPORATION OF LLP
• Procedure for incorporation is similar to that of a Company. Applicants are first

required to file Application for reservation of ‘Name’ with Registrar of Companies.
• After approval of name, documents for incorporation need to be filed.
• The body corporate shall have the name ending with words LLP.
• Like in Companies Act, LLPs are also prohibited from using some names and also of
those resembling to another LLP/Company/Trademark.
• After incorporation if similarity in name is challenged, the LLP may change name
within 24 months through ROC.
• Only partnerships registered as LLP can carry on business using LLP title after its
name.
• LLP is required to file the LLP agreement duly ratified by all partners within 30 days
of incorporation of LLP.
EXTENT OF LIABILITY
• Mutual rights/duties of partners are governed by agreement between partners or

agreement between LLP & partners.
• Every partner is deemed as agent of LLP but not of other partners.
• LLP is liable to the full extent of its assets while liability of partners is limited to their
agreed contribution.
• LLP is liable for acts of omission/commission of partners in the course of business.
• No partner is liable for acts of omission/commission by other partners.
• Liability of LLP & partners acting with intend to defraud is unlimited.
• No cessation of LLP following death/resignation etc unless a notice of cessation is
filed with ROC.
CONTRIBUTION
• Contribution by partner may be in the form of

tangible/movable/immovable/intangible property or money/promissory
notes. Obligation of partner shall be as per LLP agreement.
• LLPs are required to maintain prescribed books of accounts on
cash/accrual basis in accordance with double entry accounting system.
• However statutory audit is required only for LLPs having sales turnover >
Rs.40 lacs or where contribution>Rs.25 lacs.
• Discretion for waiver of statutory audit lies with Central Government.
• LLPs are required to file the Statement of accounts within 30 days of
completion of half year and within 60 days of completion of financial year.
TRANSFER
• Rights of partners to share profits/losses are transferable

wholly or in part but it does not cause dissociation or
winding up of LLP.
• Such transfer would not entitle the transferee to participate
in management of LLP or access to business transactions.
• Foreign LLPs are required to file prescribed documents for
registration with ROC within 30 days of establishment in
India.
CONVERSION
• Traditional partnership registered under Indian partnership

act 1932 can be converted to LLP.
• Private limited company can be converted to LLP.
• Unlisted Public limited Company can be converted to LLP.
CONVERSION
• A partnership firm can be converted to LLP if all partners of the firm become
partners of LLP.
• A Private limited or Unlisted Public Company can become an LLP if:
• (a) No security interest subsisting on its assets in force at the time of conversion
application.
• (b) All shareholders of the Company become partners of LLP and no one else.
• Provisions are made in LLP Act to accommodate compromise/arrangement. If
majority representing 3/4th in value of creditors/partners at the meeting agree to
compromise/ arrangement, then it shall be binding on all creditors provided it is
sanctioned by NCLT. For amalgamation, NCLT shall pass order after report is
received from ROC that the affairs of the transferor LLP have not been conducted in
a manner prejudicial to the interest of the public.
WINDING UP
• Can be wound up voluntarily or by NCLT.

• LLP may be wound up by NCLT when:
• (a) Number of partners falls below 2 for >6 months.
• (b) LLP is unable to pay its debts.
• LLP has acted against the sovereignty & integrity or security of the
state.
• LLP has failed to file statement of accounts with ROC for 5
consecutive years.
• NLCT is of the opinion that it is just & equitable to wind up the LLP.

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LIMITED LIABILITY PARTNERSHIP

• Unlimited liability imposed on partners in a traditional

• It is a relation between persons who have decided to share

• For a partnership to exist, it is essential that there must be

• Enacted on 7th January 2009.Government has notified the rules

• Any change in partners in an LLP does not affect the existence

• A body corporate is a Company as defined under Companies

• LLP is a body corporate formed & incorporated under LLP Act.

• Procedure for incorporation is similar to that of a Company. Applicants are first

• Mutual rights/duties of partners are governed by agreement between partners or

• Contribution by partner may be in the form of

• Rights of partners to share profits/losses are transferable

• Traditional partnership registered under Indian partnership

• Can be wound up voluntarily or by NCLT.

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