What are the Features of Limited Liability Partnership?
Limited Liability Partnership Act, 2008 came into existence from 1st April, 2009. The Act allowed entrepreneurs to start a partnership firm in which all the partners have limited liability, unlike normal partnerships that is governed by Partnership Act, 1932. Limited Liability Partnership or LLP, as it is commonly referred to has the essence of a partnership firm but is highly inspired by Companies. It can be said as a company in form of partnership. Some best Features of Limited Liability Partnership.
This is the foremost and most important feature of a limited liability partnership. This is also the primary reason because of which LLPs came into existence. Like a company, in an LLP all its partners enjoy limited liability, that is, they are liable only up to their respective capital contributions. Their personal estates too will not be used for recovery of debts and losses beyond their respective liabilities.
Number of partners
Partnership formed under Partnership Act, 1932 restricts the maximum number of partners to 20. 10 in case of banking firms. But in LLP there is no such restriction. In an LLP you can have as many partners as you want but the minimum number should not be below 2. If it does, it should be filled up within 6 months from the date of default.
In an LLP along with individuals even body corporates can be partners. But the firm must have at least 2 designated partners. Both of them must be individuals and at least one of them must be a resident in India.
Partnership firm does not have a separate legal entity. It is merely an association of person which doesn't enjoy a distinct legal entity. But an LLP does. An LLP formed under the Act is a body corporate with a separate legal entity, like a company. It has its own PAN, legal status and can get into transactions in its own name. It can also sue and get sued upon it its name.
Another benefit that LLP has over partnership is perpetual succession. A partnership gets dissolved when a partner leaves the firm or dies. But in case of an LLP this doesn't happen. An LLP remains in existence even if one or more of its partners die or retire from the firm. An LLP doesn't get dissolved. Like a company it stays in existence and is not dependent upon its partners.
A partnership firm cannot accept loans in its name. It is the partners that get the loan. But since LLPs are a body corporate with a distinct legal entity, they can. An LLP can accept loans in its name from banks and financial institutions. It can also accept private loans from or outside India. Yes, an LLP can accept foreign direct investment.
The income earned by an LLP is taxed @30% in its own hands. The income is not distributed to the partners for taxation purpose.
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