A Limited Liability Partnership (LLP) is a partnership in which some or all partners have limited liability. It therefore exhibits elements of partnerships and corporations. In an LLP, one partner is not responsible or liable for another partner’s misconduct or negligence. This is an important difference from that of an unlimited partnership.
Salient features of an LLP
An LLP is a body corporate and legal entity separate from its partners. It has perpetual succession.
Being the separate legislation (i.e. LLP Act, 2008), the provisions of Indian Partnership Act, 1932 are not applicable to an LLP and it is regulated by the contractual agreement between the partners.
Every Limited Liability Partnership shall use the words “Limited Liability Partnership” or its acronym “LLP” as the last words of its name.
Every LLP shall have at least two designated partners being individuals, at least one of them being resident in India.
Need for LLP
For a long time, a need has been felt to provide for a business format that would combine the flexibility of a partnership and the advantages of limited liability of a company at a low compliance cost.
This format would be quite useful for small and medium enterprises in general and for the enterprises in services sector in particular.
LLP is more similar to operating a Limited Company. In terms of liability, the Limited Liability Partnership is itself liable for debts run up in running the business, rather that the individual members of the LLP.