What is the full form of LLP?
The full form of LLP is the Limited Liability partnership. LLP is a combination of a traditional partnership, & a business is close to a traditional partnership and also some matches with business as some of its characteristics. 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. It means in an LLP, participants have the flexibility to 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 the neglect, wrongdoing or misconduct of another party.
- It’s a hybrid between a partnership & an organisation. In comparison, an LLP is required to 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 in order to pay for the damages or to cover the dues.
- The Government has adopted Act LLP2008, 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 distinct 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 capital of the partners. Besides, all partners must be Limited Liability Partnership agents and not other partners.
- It allows the versatility to make the necessary changes. It gives members the freedom 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 & signature the LLP agreement at the branch of the ROC (Registrar of Companies).
- It also has endless succession, that ensures the corporation will not break if either of the partners expires or go 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.