Limited Liability Partnership


Limited Liability Partnership

Limited Liability Partnership has been introduced in India by way of Limited Liability Partnership Act, 2008. The basic premise behind the introduction of Limited Liability Partnership (LLP) is to provide a form of business organization that is simple to maintain while at the same time providing limited liability to the owners. A Limited Liability Partnership combines the advantages of both the Company and Partnership into a single form of organization and one partner is not responsible or liable for another partner’s misconduct or negligence. Therefore, all partners have a form of limited liability for each individual’s protection within the partnership, similar to that of the shareholders of a corporation. However, unlike corporate shareholders, the partners have the right to manage the business directly. An LLP also limits the personal liability of a partner for the errors, omissions, incompetence, or negligence of the LLP’s employees or other agents. LLP is one of the easiest form of business to incorporate and manage.


LLP is an alternative corporate business form that gives the benefits of limited liability of a company and the flexibility of a partnership. The LLP can continue its existence irrespective of changes in partners. It is capable of entering into contracts and holding property in its own name. The LLP is a separate legal entity, is liable to the full extent of its assets but liability of the partners is limited to their agreed contribution in the LLP.

Mutual rights and duties of the partners within a LLP are governed by an agreement between the partners or between the partners and the LLP as the case may be. The LLP, however, is not relieved of the liability for its other obligations as a separate entity.

Since LLP contains elements of both “a corporate structure” as well as “a partnership firm structure” LLP is called a hybrid between a company and a partnership.

Renowned form of business worldwide in comparison to company.

Low cost of Formation.

Easy to establish.

Easy to manage & run.

No requirement of any minimum capital contribution.

No restrictions as to maximum number of partners.

LLP & its partners are distinct from each other.

Partners are not liable for Act of other partners.

Less Compliance level.

No exposure to personal assets of the partners except in case of fraud.

Less requirement as to maintenance of statutory records.

Easy to dissolve or wind-up.

No  Tax on profits distributed by LLP to its partners.

Scope of Tax Planning.

A LLP can only be formed for “carrying on a lawful business with a view to earn profit” and therefore it cannot be incorporated for non profitable purpose.

LLPs are the self regulated form of organization where the major governing provisions can be decided by the Partners itself through the LLP Agreement like:

Mutual Rights and duties of the Partners and the LLP.

Liability of the Partners.

Profit Sharing of the Partners.

Remuneration to the Partners.

Conduction of Partners Meeting.

The flexibility is with the partners to make it either stringent structure or free structure.

Currently activities related to financing , leasing , investment in securities cannot be carried on in LLP.

LLP is suitable for mostly all type of business whether small, medium and large but worldwide it is more popular in  service sector.

Yes, Professionals can form LLP subject to the rules and regulation by which they are governed.

Yes, partners can carry on varied nature of business in single LLP.

Minimum two partners including two designated partners.

Designated Partners Identification Number (DPIN) for each Designated Partner.

Digital Signature for every Designated Partner.

Capital as minimum as Re 1 each partner.

LLP Agreement.

Only an individual can be appointed as a ’Designated Partner’ and at least one of the Designated Partner shall be a resident of India. In case of a LLP in which all the partners are bodies corporate or in which one or more partners are individuals and bodies corporate, at least two individuals who are partners of such LLP or nominees of such bodies corporate shall act as designated partners.

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