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Question
Answer the following question:
State the features of Limited Liability Partnership.
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Solution
Limited Liability Partnership is a combination of Partnership and Joint Stock Company. As it has limited liability so the personal assets of the partners are not attached for paying off the debts of LLP. It is governed by the Limited Liability Partnership Act, 2008.
The features of Limited Liability Partnership (LLP) are stated as follows:
(1) Independent existence: The Limited Liability Partnership (LLP) is an independent legal entity. It has separate legal existence distinct from
its members. (i.e. partners). From a legal point of view, it recognised as a legal person.
(2) Number of Partners: The LLP must have a minimum of 2 partners to start with. There is no limit on its maximum membership.
(3) Capital contribution: There is no requirement (need) of minimum capital contribution.
(4) Formation: The LLP is easy to form and easy to operate and run. The cost of formation is also low.
(5) Limited Liability: The partners have limited liability. Limited liability implies in the event of insolvency of LLR its creditors cannot attach the personal property of the partners in settlement of their claims. At most partners will lose their capital invested in the business.
(6) Mobility of members: Any person can join the LLP at any time. There is no restriction on joining the LLP as a partner or member. The existing partner or member can leave the LLP at any time if it is not mentioned in the partnership agreement.
(7) No tax on the share of profit: Since LLP is a legal entity, the government imposes a tax on its profits. In order to avoid double taxation, the partners or members are not required to pay tax on the share of the profit they receive from LLP.
(8) The statute governing LLP: All Limited Liability Partnerships are regulated, governed, and controlled by the Limited Liability Partnership Act of 2008.
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