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According to LIMITED LIABILITY PARTNERSHIP ACT, 2008, LLP means a partnership in which some or all partners have limited liabilities. It is an alternative corporate business form which offers benefits of limited liability to the partners at low compliance cost, and also it is a legal entity, liable for the full extent of its assets.

Thus, LLP is a hybrid between a company and a partnership.

There are various highlighted features and advantages of having LLP into existence. Forming a LLP is an easy process. It is not complicated and time consuming as the process of a company. The partners of the LLP have limited liability which means partners are not liable to pay the debts of the company from their personal assets. No partner is responsible for any other partner’s misbehavior or misconduct. The life of the Limited Liability Partnership is not affected by death, retirement or insolvency of the partner. The LLP will get winded up only as per provisions of the act of 2008.  All the decisions and various management activities are seen and done by the directors of the company. . It is easy to admit a new partner and to leave the firm or to easily transfer the ownership onto others. For income tax purpose, LLP is treated on a par with partnership firms. Thus, LLP is liable for payment of income tax and share of its partners in LLP is not liable to tax. Thus no dividend distribution tax is payable.  Interest to partners, any payment of salary, bonus, commission or remuneration allowed as deduction.

All the companies, whether private or public, irrespective of their share capital, are required to get their accounts audited. But in case of LLP, there is no such mandatory requirement.

 A LLP is required to get the tax audit only in the case that:

• CONTRIBUTION OF LLP EXCEEDS RS.25 LAKHS , OR
• THE ANNUAL TURNOVER OF LLP EXCEEDS RS 40 LAKHS.

A LLP is not bound by anything done by a partner in dealing with a person if- the partner in fact has no authority to act for the LLP in doing a particular act. But, it will be liable if any partner of LLP is liable as a result of any wrongful  act on his part in the course of business of LLP.

There is unlimited liability of LLP and its partner’s in case of fraud.

The final disclosure of a LLP institutes:

• Maintaining proper books of accounts either on cash basis or accrual basis.
• Statement of account and solvency shall be maintained within a period of 6 months from the end of each financial year.
  If a LLP fails to comply with the provisions mentioned shall be punishable with a fine not less than Rs. Twenty five thousand but which may extend to Rs. 5 lakhs.

The LLP Act 2008 provides for following two modes for winding up the LLP i.e. voluntary winding up or compulsory winding up. In case the LLP wants to close down its business or where it is not carrying on any business operations for the period of one year or more, it can make an application to the Registrar for declaring the LLP as defunct and removing the name of the LLP from its register of LLP’s.

SAMPLE CONTRACT OF LLP

LIMITED LIABILITY PARTNERSHIP AGREEMENT (As per Section 23(4) of LLP Act, 2008)  

THIS Agreement of Limited Liability Partnership made at DELHI, INDIA this TUESDAY of 21/02/2020.   

BETWEEN   

1. MR.KUSH BHATIA son of ___MR. RAHUL  BHATIA, residing at __RAJOURI GARDEN,DELHI , which expression shall, unless it be repugnant to the subject or context thereof, include his legal heirs, successors, nominees and permitted assignees and hereinafter called the FIRST PARTY, and  

2. MR._KARTIK  AGGARWAL  son of MR.HARSHVARRDAN AGGARWAL, residing at NEW ASHOKA NAGAR,NOIDA, which expression shall, unless it be repugnant to the subject or context thereof, include his legal heirs, successors, nominees and permitted assignees and hereinafter called the SECOND PARTY,  

(THE FIRST AND SECOND PARTY SHALL BE INDIVIDUALLY REFERRED TO AS A PARTNER AND COLLECTIVELY AS PARTNERS)  

WHEREAS the abovementioned PARTIES have mutually agreed to carry on business of LAW FIRM and other ancillary business more particularly described in the Schedule I annexed herewith or any other business in any other manner as may be decided by the majority of Partners.  

NOW The First and Second Party are interested in forming a Limited Liability Partnership under the Limited Liability Partnership Act, 2008 and that they intend to record the terms and conditions of the said formation.  

BIBLIOGRAPHY

• www.legalraasta.com
• www.investopedia.com
• Wikipedia
• ICAI Study Material

Author - Vanshika Bhatia