All about Limited Liability Partnership (LLP)

[2021] 130 taxmann.com 479 (Article)

Limited Liability Partnership (LLP)

1. Limited liability partnership (LLP) is a form of alternative corporate business(incorporated under the Limited Liability Partnership Act 2008) providing the benefits of limited liability that of a company and at the same time have the flexibility of a partnership firm. The limited liability partnership is a separate legal entity, is liable to the full extent of its assets but the liability of the partners is limited to their agreed contribution in the limited liability partnership. The following are the main features of LLP.

A. Limited liability partnership can continue its existence irrespective of changes in partners.

B. It is capable of entering into contracts and holding property in its own name.

C. The limited liability partnership is a separate legal entity is liable to the full extent of its assets but the liability of the partners is limited to their agreed contribution in the limited liability partnership

D. Further, no partner is liable on account of the independent or un-authorized actions of other partners, thus individual partners are shielded from joint liability created by another partner’s wrongful business decisions or misconduct

E. The limited liability partnership gives the benefit of limited liability of a company and also the flexibility of a partnership.

Limited liability partnership worldwide

2. This form of business organization i.e., LLP is available in other countries such as the United Kingdom, United States of America, Australia, Singapore, and by and large in all Gulf countries. In the Kingdom of Bahrain, they have the “Law on Commercial Companies” and under the provisions of this Act, incorporation of the companies takes place in the Kingdom of Bahrain. The Act spells out amongst other forms of companies; it includes (a) General Partnership company and (b) Limited Partnership Company.

Partners of LLP – their rights and duties

3. Limited liability partnership agreement entered between the partners or agreement entered between the partners and the limited liability partnership as the case may be would set out the rights and duties of the partners and the LLP agreement is the governing documents. However, the limited liability partnership is not relieved from its other obligation since it is a separate legal entity and has perpetual succession in spite of the change in the partners in the limited liability partnership.

We can say that the limited liability partnership is a hybrid form of an organization that has the futures of a partnership firm under the Partnership Act of 1932 and as well features of the Companies Act of 1956 / 2013. The Registrar of Companies (RoC) is the administrative authority as a limited liability partnership is a body corporate and it is a separate legal entity that is separate from its partners.

Difference between the limited liability partnership (LLP) and the traditional partnership firm

4. Prior to the introduction of limited liability partnership by the regulators, we have been having the partnership Act of 1932″ typically the traditional partnership firm.

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