The Hindu Business Line : Limited liability partnership turning reality for corporates

LLP is a new corporate structure that combines the flexibility of a partnership and the advantages of limited liability of a company at a low compliance cost.

A senior official from the Ministry for Corporate Affairs told Business Line that, “last minute preparations are going on. Efforts are on to notify the rules to implement the LLP Act today (on Wednesday) so that the first LLP can be registered from the beginning of the new financial year (2009).”

The LLP format is an alternative corporate business vehicle that provides the benefits of limited liability of a company, but allows its members the flexibility of organising their internal management on the basis of a mutually arrived agreement, as is the case in a partnership firm.

The registration of LLPs will also be a paperless affair as it will also be covered under MCA-21 e-governance programme of the Ministry. It is a corporate form that enables professional expertise and entrepreneurial initiative to combine, organise and operate in an innovative and efficient manner, the official said.

This format would be useful for small and medium enterprises, in general, and for the enterprises in services sector, in particular. Internationally, LLPs are the preferred vehicle of business, particularly for service industry or for activities involving professionals.

According to the Act, LLP shall be a body corporate and a legal entity separate from its partners. It will have perpetual succession. 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.

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

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