Limited Liability Partnership Act, 2008

The very long-awaited and eminently feasible entity - the Limited Liability Partnership (LLP) is now a ground reality…and it has’nt come easily. Parliament passed the Limited Liability Partnership Bill 2008, paving the way for an alternative corporate business vehicle that will give the benefits of limited liability and allow businesses to organize their internal structure as a partnership based on an agreement.

Viewed against the backdrop of the Service sector playing such a significant role in the national economy, the need for such enabling legislation for LLP was felt since long. However the gestation period proved to be a long one.

The Limited Liability Partnership Bill which was introduced in the parliament in 2006 was referred to the Parliamentary Standing Committee on Finance for examination and report. Based on the Committee’s recommendations the 2006 Bill was withdrawn, modified and reintroduced as ‘The Limited Liability Partnership Bill, 2008.

The salient features of the LLP Bill, 2008 are as follows: 

LLP shall be a body corporate and a legal entity separate from its partners with perpetual succession.

·   The LLP will be an alternative corporate business vehicle that would give the benefits of limited liability but would allow its members the flexibility of organizing their internal structure as a partnership based on an agreement.

·   The Bill does not restrict the benefit of LLP structure to certain classes of professionals only and would be available for use by any enterprise which fulfills the requirements of the Act.

·   While the LLP will be a separate legal entity, liable to the full extent of its assets, the liability of the partners would be limited to their agreed contribution in the LLP.

·   No partner would be liable on account of the independent or un-authorized actions of other partners, thus allowing individual partners to be shielded from joint liability created by another partner’s wrongful business decisions or misconduct. 

·   There is no upper limit on the number of partners in an LLP. The designated partners (at least one to be a resident in India) will be responsible for ensuring compliance with statutory obligations.

·   Foreign LLP may establish a place of business in India, in accordance with rules which are to be separately framed and notified by the government.