Meaning of Limited Liability Partnership
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Detailed Solution & Explanation
Limited Liability Partnership:
A need has been felt to make a new legislation related to a new corporate form of business
organization in India to meet with the contemporary growth of the Indian economy. It
provides an alternative to the traditional partnership with unlimited liability on the one hand
and the statute-based governance structure of the limited liability company on the other
hand, in order to enable professional expertise and entrepreneurial initiative to combine,
organize and operate in flexible, innovative and efficient manner.
Limited Liability Partnership (LLP) is a corporate business organization that provides the
benefits of limited liability but also allows its members the flexibility of organizing their
internal structure just like in case of a partnership, based on a mutually arrived agreement.
The LLP form enables entrepreneurs, professionals and enterprises providing services of any
kind or engaged in scientific and technical disciplines, to form commercially efficient
vehicles suited to their requirements. Owing to flexibility in its structure and operation, the
LLP is a suitable vehicle for small enterprises and for investment by venture capital.
A LLP is a new form of legal business entity with limited liability. It is a separate legal entity
where LLP itself is liable to the third parties upto the assets it owns but the liability of the
partners is limited. It is an alternative corporate business vehicle that not only gives the
benefits of limited liability at low compliance cost but allows its partners the flexibility of
organising their internal structure as a traditional partnership. It gives the benefits of limited
liability of a company and the flexibility of a partnership.
LLP is also called as a hybrid between a company and a partnership as it contains elements of
both, a corporate entity as well as a partnership.
Since LLP contains elements of both 'a corporate structure' as well as 'a partnership firm
structure' LLP is called a hybrid between a company and a partnership.
About This Chapter: Partnership & Companies
Paper
Paper 1: Accounting
Weightage
15-20%
Key Topics
Admission, Retirement, Death, Shares, Debentures
This chapter covers Admission, Retirement, Death, Shares, Debentures and is part of Paper 1: Accounting in the CA Foundation exam.
View Official ICAI SyllabusExam Strategy Tip
This topic carries 15-20% weightage. Focus on understanding core concepts rather than memorizing.
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Following are the details of Assets and Liabilities of Mr. Sarthak for the year ended 31 March, 2023 and 31 March, 2024: 31.03.2023 31.03.2024 Assets Buildings Furniture Inventory Sundry debtors Cash at bank Cash in hand Liabilities: Loans Sundry Creditors 2,00,000 75,000 1,05,000 68,000 72,500 2,400 1,50,000 58,400 ? ? 1,95,000 94,000 86,800 3,800 1,25,000 79,500 It was decided to depreciate Building by 5% p.a. and Furniture by 10% p.a. On 1st June, 2023 an additional capital of 40,000 was brought in the business. Proprietor has withdrawn @ ₹ 2,500 p.m. for meeting the family expenses. Prepare Statement of Affairs as on 31 March, 2023 and 31 March, 2024. Find the profit or loss earned by Mr. Sarthak for the year ended 31st March, 2024. [Jan. 2025, 5 Marks]
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