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MBA, Semester 1

Legal Aspects of Business


Ms. Shinu Vig
Amity Business School
Limited Liability Partnership Act, 2008

Section 2(n) says Limited Liability Partnership means a
partnership formed and registered under this Act.

Nature of LLP:
A LLP is a body corporate formed and incorporated
under this Act and is a legal entity separate from that of
its partners.
A LLP shall have a perpetual succession.
Any change in the partners of LLP shall not affect the
existence, rights or liabilities of the LLP.





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Limited Liability Partnership

It is a corporate business vehicle

enables professional expertise and entrepreneurial
initiative to combine and operate in flexible,
innovative and efficient manner

provides benefits of limited liability

allows its members the flexibility for organizing their
internal structure as a partnership.




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Unique features of LLP:

1. LLP Agreement:
The mutual rights and duties of Partners will be decided by the LLP
Agreement between Partners or between the LLP and its Partners, if
there is one. Otherwise, the First Schedule of the LLP Act will apply.
2. Designated Partners:
LLP Act provides that every LLP should have a minimum of two
Designated Partners who are individuals. One of the Designated
Partners has to be resident in India.
3. Limited Liability:
Liability of the partners is restricted only to the amount of their
contribution. There is no exposure to the personal assets of the
partners except in the case of fraud.
(Contd.)




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4. Contribution by Partners
A contribution by a Partner can be in the form of any tangible,
movable or immovable or intangible property or other benefits.
6. Assignment and Transfer of Partnership Rights:
As per the Act, partnership rights relating to share of profits and
losses, right to receive distributions as per LLP agreement in
whole or part can be assigned and transferred.
7. Registered Office:
Every LLP shall have a registered office to which all the
communications and notices may be addressed.
8. Statement of Account & Solvency / Annual Return
Every LLP has to file a Statement of Account & Solvency with
the Registrar within a period of 30 days from the end of 6
months of each financial year.
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Liabilities of Designated Partners

A Designated Partner shall be :
a) Responsible for doing all the acts as are required to
be done by LLP in respect of compliance of the
provisions of the LLP Act, including filing of any
return, document or statement.
b) Liable to any penalties imposed on LLP for any
contravention of the above mentioned provisions.
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Merits of LLP:
Easy and less expensive formation
Flexibility in management
No requirement of any minimum capital contribution by partners.
No restriction as to maximum number of partners
LLP is a separate legal entity.
Partners are not liable for acts of other partners.
Low Compliance cost.
No exposure to personal assets of the partners except in case of
fraud.
Less requirement as to maintenance of statutory records
Less Government Intervention
Easy to dissolve or wind-up
Professionals can form Multi-disciplinary Professional LLP,
which was not allowed earlier
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Qualifications for becoming a partner:
Any individual or body corporate may be a partner in a
LLP.

However an individual shall not be capable of becoming a
partner of a LLP, if
(a) he has been found to be of unsound mind by a Court
of competent jurisdiction and the finding is in force;
(b) he is an undischarged insolvent; or
(c) he has applied to be adjudicated as an insolvent and
his application is pending.
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Incorporation of LLP:
1. Acquire DPIN/ DIN and DSC.
2. Check name availability.
3. Download LLP forms.
4. File electronically.
5. Track status
6. Receive Certificate of Incorporation

Name of LLP:
Every LLP shall have either the words Limited
liability partnership or the acronym LLP as the last
words of its name.




Change in partners

Persons, who subscribed to the
Incorporation Document at the time of
incorporation of LLP, shall be partners of
LLP. Subsequent to incorporation, new
partners can be admitted in the LLP as per
conditions and requirements of LLP
Agreement.
A person may cease to be a partner in accordance with
the agreement or in the absence of agreement, by giving 30 days
notice to the other partners.

A person shall also cease to be a partner of a limited liability
partnership-
(a) on his death or dissolution of the limited liability partnership;
or
(b) if he is declared to be of unsound mind by a competent court;
or
(c) if he has applied to be adjudged as an insolvent or declared as
an insolvent.

Notice is required to be given to ROC when a person becomes or
ceases to be partner or for any change in partners.
Accounts and audit
The LLP shall be under an obligation to
maintain annual accounts reflecting true
and fair view of its state of affairs. A
statement of accounts and solvency shall
be filed by every LLP with the Registrar
every year. The accounts of LLPs shall
also be audited, subject to any class of
LLPs being exempted from this
requirement by the Central Government.
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Conversion into LLP:
Following entities may convert into LLP:
1. A firm
2. A private company
3. An unlisted public company


A firm, private company or an unlisted public company is allowed to
be converted into LLP in accordance with the provisions of the Act.
Upon such conversion, on and from the date of certificate of
registration issued by the Registrar in this regard, the effects of the
conversion shall be such as are specified in the LLP Act.
On and from the date of registration specified in the certificate of
registration, all tangible (moveable or immoveable) and intangible
property vested in the firm or the company, all assets, interests,
rights, privileges, liabilities, obligations relating to the firm or the
company, and the whole of the undertaking of the firm or the
company, shall be transferred to and shall vest in the LLP
The firm or the company, shall be deemed to be dissolved and
removed from the records of the Registrar of Firms or Registrar of
Companies, as the case may be.
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Winding up of LLP:
The winding up of LLP can be either voluntary or by the Tribunal.

LLP can be wound up by the Tribunal:
a. If the number of partners is reduced below two, for a period
more than six months.
b. If LLP is unable to pay its debts.
c. LLP has acted against the interest of the sovereignty of the
country
d. If LLP has made a default in filing Statement of Account and
Solvency or Annual Return for a consecutive period of 5 years.
e. Any other reason which is just and equitable.

* Tribunal means National Company Law Tribunal