Limited Liability Partnership (LLP)

Limited liability partnership is a partnership but as it is clear from the name itself, it has a limited burden of liability distinct from the traditional one where the liability is not limited and all the partners have to bear the burden in case of loss in business. An LLP have the benefits of both a Partnership and a company. In reality, It lies somewhere between the partnership and the body corporate. In other words LLP is an alternative corporate business form that gives the benefits of limited liability of a company and the flexibility of a partnership.

LLP is one of the easiest types of business to incorporate and manage in India. With an easy incorporation process and simple compliance formalities, LLPs are preferred by Professionals, Micro and Small businesses that are family-owned or closely-held. Since LLPs are not capable of issuing equity shares, LLP should NOT be chosen for any business that has plans for raising equity funds from Angel Investors, Venture Capitalist or Private Equity Funds.

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Difference between LLP and general partnership

The first difference between an LLP and a partnership firm is that both are governed by different Acts. LLP is governed by LLP Act and Companies Act while partnership is governed by Indian partnership Act.

Another difference between partnership and an LLP is related to its entity. An LLP has a separate legal entity while the partnership has not any kind of separate legal entity.

An LLP practice perpetual succession while a general partnership firm does not observe perpetual succession. It means an LLP can still continue with its business regardless of possible partner changes or they can hold properties in their own name because they are independent entities separate from their individual partners while a standard partnership refers to its partners as the firm and not independent of their partners.

Required number of minimum members is two in both the LLP and the Partnership but as far as the maximum number is concerned, it is 20 in the case of a general partnership while no such restriction is there in case of an LLP.

There must be a contribution from the partners as to the capital according to LLP Act in an LLP while no such requirement is there in a partnership.

As far as the partners identity is concerned, no such requirement in a partnership firm but in a LLP the designated partner must obtain the DPIN.

In an LLP, the liability is limited according to the contribution of the partners while in general partnership, the liability is unlimited. further the LLP can have one or more of its partners with limited liability as opposed to a partnership wherein all partners have unlimited liability they are liable for the actions of all other member partners.

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Difference between Company and LLP

The first difference between a company and an LLP is as to the capital requirements. 1 lakh in case of a private company and 5 lakh in case of a public company is required as minimum capital to initiate a company. While no such minimum requirement is there for establishing an LLP. However there needed contribution as per the LLP Act.

In a company, all directors must have to obtain DIN that is directors identification number while in case of an LLP only designated partners have to obtain the DPIN or the Designated Partners Identification Number.

Companies are mostly preferred for doing large business while LLPs are preferred mostly by professionals.

Listing of a company in stock market is possible while its not possible in case of an LLP.

In case of decision making for the day to day function of a company, the consent of shareholders are not required but in case of an LLP the consent of partners are required.

The requirement of having a common seal is mandatory in case of company but not so in the LLP. Its optional in the case of an LLP.

In a company, the authority to take decision to conduct business lies with the board of directors. Any individual director or member do not have any authority. On the other hand every partner has authority to conduct business in an LLP, unless the LLP Act provides otherwise.

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DOCUMENTS REQUIRED FOR LLP INCORPORATION

The following are the documents required for registration of LLP in India:
FOR THE PARTNERS

1. PAN Card or Passport for Foreigners.

2. Drivers license or Aadhar card, residence card or election identity card or any other identity proof issued by the Government.

3. Less than 3 months old bank statement or telephone bill.

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REGISTERED OFFICE PROOF

1. The authorization from the Landlord (Name mentioned in the Electricity Bill or Gas Bill or Water Bill or Property Tax Receipt or Sale Deed) to use the premises by the company as its registered office. This is usually referred to as NOC from Landlord; AND

2. Proof of evidence of any utility service like telephone, gas, electricity, etc. depicting the address of the premises in the name of the owner or document, which is not older than two months.

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