Concept of LLP
Limited Liability Partnerships (LLPs) are commercial vehicles which combine the features of partnership and company form of business .The concept of Limited Liability Partnership (LLP) has been introduced in India by way of Limited Liability Partnership Act, 2008 (notified on 31st March 2009).
A Limited Liability Partnership combines the advantages of both the Company and Partnership into a single form of organization.
However, unlike the company 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 – A Separate Legal entity
LLP is 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.
Further, 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.
Difference between LLP & "partnership firm"
Under “Partnership firm”, every partner is liable, jointly with all the other partners and also severally for all acts of the firm done while he is a partner.
Under LLP structure, liability of the partner is limited to his agreed contribution alike to shareholders in companies. (Limited liability)
Further, no partner is liable on account of the independent or un-authorized acts of other partner, thus no mutual agency .
Difference between LLP & a Company
A basic difference between an LLP and a joint stock company lies in that the internal governance structure of a company is regulated by Companies Act, 2013 whereas for an LLP it would be by a contractual agreement between partners.
It’s formed by minimum two members as partners and there are no maximum limits for this type of business.
Limited Liability Company is an association of persons or a legal entity formed for profit motive and more importantly the business is different from its partners in every legal case.
Advantage of LLP
LLP company is has more benefits as compared than other big companies as it’s formation cost is very low and the other legal requirements are also low as compared to companies.
A LLP also provides limited liability protection for the owners from the debts of the LLP.