What is the full form of LLP?
The full form of LLP is a Limited Liability partnership. LLP is a combination of a traditional block, and for instance, it offers the flexibility of a conventional partnership firm and the advantage of a company’s limited liability at a low compliance cost. In an LLP, participants can coordinate their internal strategies on the performance of a mutually negotiated arrangement, such as a partnership firm, and even the partners have limited liability where the liability of every partner is restricted.
- Besides that, in an LLP, one party is not liable or charged for another party’s neglect, wrongdoing or misconduct.
- It’s a hybrid between a partnership & an organisation. An LLP must have at least one “General Partner” with unlimited liability in individual nations.
- In businesses where liability is limitless, the partners’ private properties can be sold off to pay for the damages or cover the dues.
- The Government has adopted Act LLP 2008, which entered into force on 1 April 2009, to resolve this restriction.
- LLP is also a legal entity since it has to be licenced with the ROC (Registrars of Companies) and is regulated by the 2008 LLP Act.
Advantages of LLP
- It is distinct from its partners, or partners are different from the company. No one can contact property rights if a business causes massive casualties. Only the sum they invested in companies will be affected.
- The liabilities are restricted and are still in proportion to the equity of the partners’ capital. Besides, all partners must be Limited Liability Partnership agents and not other partners.
- It allows the versatility to make the necessary changes. It will enable members to coordinate their internal operations, as is the case in a collaboration company, based on a shared agreement.
- Easy to set up. The partners are expected to visit & sign the LLP agreement at the branch of the ROC (Registrar of Companies).
- It also has endless succession, ensuring the corporation will not break if either partner expires or goes bankrupt.
- There should be at least two partners, at least one of whom should be a citizen of India, but the maximum number of partners is not restricted and foreign partners are also permitted.
- For charity or nonprofit purposes, an LLP could not be created.