An LLP or a Limited Liability Partnership is a certain corporate structure which has combined the flexibility in a partnership along with the advantages of having limited liability.The limited liability partnership of a company at a low compliance cost, so in a way, it’s an alternate vehicle for the corporate business which would provide the benefits of a limited liability of a given company. It would provide with all the above mentioned and at the same time will allow its involved members the flexibility of having an internal management organized on the basis of mutual agreement that they arrive on. And this is in the case of having a partnership firm.
Details and benefits of a limited liability partnership
Because of such a flexibility in the structure of Limited Liability Partnership, it’s rather useful when you have a small or a medium enterprise. And basically for all the service sector enterprises in general. Internationally the limited liability partnerships are a more preferred vehicle for running a business and particularly in the service sector that involves many professionals so that the investors are never at the risk of losing everything on an international level.
A limited liability partnership is always governed by the rules and provisions that come under the limited liability partnership act of the year 2008 and the salient features of it are as followed: –
- A limited liability partnership is a corporate body and also a legal entity of itself which is separate from the partners that run it.
- Whenever any two individuals that are associated in carrying out a lawful business with the financial profit in mind could subscribe their names to a document and then incorporate their partnership by filing that document to the registrar and form a Limited Liability Partnership. This limited liability partnership could have a perpetual succession.
- The rights and the duties are mutual to all the partners involved in the limited liability partnership and these shall be governed by a legal agreement among the partners in limited liability partnership. All subject to the provisions summarised under the limited liability partnership act of 2008. The act hereby provides a flexibility for devising their agreementas per their choices.
- The limited liability partnership itself is a legal entity will have the liability of having its own assets to a full extent. This will be through the partners being limited with respect to their agreed contribution in the limited liability partnership. The once formed limited liability partnership may or may not be tangible in nature, also none of the partners would be then liable on the accounts of any unauthorized independent actions performed by other partners in the Limited Liability Partnership. If any partners are found to have been into fraud activities or any misconduct then those partners’ liability shall become unlimited for all the damages and debts caused through them.
- Any limited liability partnership formed must have at least two individuals designated as the partners. It’s compulsory that at least one of these two must be a resident of India and their duties and obligations will then be provided as per the law.
- The limited liability partnership will be under the mandatory obligation of filing their annual returns on the maintained accounts that will, in turn, reflect their state of affairs whether their work is being done in fairways. These statements of their accounts must be filed each year with the registrar and also must be mandatorily audited depending on their annual turnover in the business.
- The central government has the power for investigating the affairs of any limited liability partnership in case it feels the need to. A competent inspector shall be sent to visit to do the job of investigation.
- Any compromises or any arrangements that will include any merger or an amalgamation of the respective Limited Liability Partnership then it shall be in accordance with the provisions under the limited liability partnership act of 2008. The Indian partnership act of 1932 will not be applicable to the limited liability partnerships.
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Source by: http://www.swaritadvisors.gomilio.com/en/blog/what-is-the-need-of-limited-liability-partnership-38
