LLP Act 2008 Revision Notes
Ch
12
: The LLP Act, 2008
×
1
. What is an LLP?
A hybrid of a company and a partnership. Provides
limited liability
with the
flexibility
of a partnership.
It is a
body corporate
with a legal entity separate from its partners.
Has
perpetual succession
; changes in partners do not affect its existence.
The Indian Partnership Act, 1932 is
not applicable
to LLPs.
Ch
12
: The LLP Act, 2008
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2
. Incorporation & Partners
Minimum of
two partners
required. No maximum limit.
Partners can be individuals or bodies corporate.
Must have at least
two Designated Partners
(individuals).
At least one Designated Partner must be
resident in India
(stay of
120 days
or more in the financial year).
Incorporation is done by filing an
incorporation document
(FiLLiP form) with the Registrar.
Ch
12
: The LLP Act, 2008
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3
. Agreement & Liability
Mutual rights and duties are governed by the
LLP Agreement
.
In the absence of an agreement,
Schedule I
of the Act applies.
Limited Liability
: Partner's liability is limited to their agreed contribution.
Mutual Agency
: A partner is an agent of the LLP,
not
of other partners. One partner's actions do not bind others.
Liability becomes
unlimited
in case of acts done with
intent to defraud
creditors.
Ch
12
: The LLP Act, 2008
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4
. Financial Disclosures
Must maintain
proper books of account
on accrual or cash basis.
Must prepare a
Statement of Account and Solvency
every year.
This statement must be filed with the Registrar within
6 months
from the end of the financial year.
Must file an
Annual Return
with the Registrar within
60 days
of the closure of its financial year.
Audit of accounts is required as per prescribed rules.
Ch
12
: The LLP Act, 2008
×
5
. Conversion & Winding Up
Conversion to LLP
A
Partnership Firm
can convert into an LLP (Schedule II).
A
Private Company
can convert into an LLP (Schedule III).
An
Unlisted Public Company
can convert into an LLP (Schedule IV).
Winding Up by Tribunal
If partners fall below
two
for more than 6 months.
If LLP is unable to pay its debts.
If LLP has acted against the
sovereignty and integrity
of India.
Default in filing financial statements for
5 consecutive years
.
Ch
12
: The LLP Act, 2008
×
6
. Key Differences
LLP vs Partnership Firm
Legal Status
: LLP is a body corporate, Firm is not.
Liability
: Limited in LLP, Unlimited in Firm.
Mutual Agency
: Partners are not agents of each other in LLP. They are in a Firm.
Registration
: Mandatory for LLP, Voluntary for Firm.
LLP vs Company
Governing Act
: LLP Act vs Companies Act.
Internal Governance
: By agreement in LLP, by statute in Company.
Management
: By partners in LLP, by directors in Company.
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