Salient features of LLP?

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Answer Solution: Characteristic/Salient features of LLP are: 1. A body corporate A LLP is a body corporate formed and incorporated under LLP Act and is a legal entity separate from the partners constituting it. [Sec. 3] 2. Separate Legal Entity The LLP is a separate legal entity. It is liable to the full extent of its assets but liability of the partners is limited to their agreed contribution in the LLP. In other words, creditors of LLP shall be the creditors of LLP alone and not of the partners. 3. Perpetual Succession Death, insanity, retirement or insolvency of partners has no impact on the existence of LLP. The LLP can continue its existence irrespective of changes in partners. It can enter into contracts in its own name. It can also hold properties in its own name. It is created by law and law alone can dissolve it. 4. Absence of Mutual Agency The cardinal principal of mutual agency of partners in a partnership is missing in LLP. In case of LLP, the partners of LLP are agents of LLP alone and not of the other partners. Hence, no partner can be held liable on account of the independent or unauthorized actions of other partners. Thus individual partners cannot be held liable for liability incurred by another partner's wrongful business decisions or misconduct. 5. LLP Agreement The partners are free to make rules related to the mutual rights and duties of the partners as per their choice. This is done through an agreement, In the absence of any such agreement, the mutual rights and duties shall be governed by the provisions of the LLP Act, 2008. 6. Artificial Person A LLP is an Artificial legal person created by law capable of enjoying all the rights of an individual. It can do everything which a natural per- son can do, except the contracts of very personal nature like, it cannot marry, it cannot go to jail, cannot take an oath, cannot marry or get divorce. Further, it cannot practice a learned profession like CA, Law or Medicine. A LLP is invisible, intangible, immortal but not fictitious because it really exists. 7. Common Seal Being an artificial person, a LLP work on its own but it has to act through its partners. Hence, it may have a common seal which can be considered as its official signature. [Section 14(c)]. It should be noted that it is not mandatory for a LLP to have a common seal. If it decides to have one, then it shall remain under the custody of some responsible official and it shall be a fixed in the presence of at least 2 designated partners of the LLP. 8. Limited Liability Every partner of a LLP is, for the purpose of the business of LLP, the agent of the LLP, but not of other partners (Section 26). The liability of the partners will be limited to their agreed contribution in the LLP. 9. Management of Business The partners in the LLP are entitled to manage the business of LLP. However, only the designated partners are responsible for legal compliances. 10. Minimum and Maximum number of Partners Every LLP shall have least two partners and shall also have at least 2 individuals as designated partners. It is mandatory that at least one of the designated partners shall be resident in India. Further, there is no maximum limit of partners in LLP. 11. Business for profit Only LLP can be formed only for carrying on any lawful business with a view to earn profit. Thus, LLP cannot be formed for charitable or not-for- profit purpose. 12. Investigation The Central Government shall have powers to investigate the affairs of an LLP by appointment of competence authority. 13. Compromise or Arrangement Any compromise or arrangement including merger and amalgamation of LLPs shall be in accordance with the provisions of the LLP Act, 2008. 14. Conversion into LLP A firm, private company or an unlisted public company would be allowed to be converted into LLP in accordance with the provisions of LLP Act, 2008. 15. E-Filing of Documents Every form or application of document required to be led or delivered under the act and rules made thereunder, shall be led in computer read- able electronic form on its website www.mca.gov.in and authenticated by a partner or designated partner of LLP by the use of electronic or digital signature. 16. Foreign LLPs Section 2(1)(m) defines foreign limited liability partnership "as a limited liability partnership formed, incorporated, or registered outside India which established a place of business within India". Foreign LLP can become a partner in an Indian LLP. Advantages of LLP Form The following are the advantages of LLP form of business organization: 1. It is easier to form a LLP as compared to a company. 2. The partners of a LLP enjoy limited liability. 3. It operates on the basis of an agreement. 4. It is not rigid as far as capital structure is concerned. 5. It provides flexibility without imposing detailed legal and procedural requirements. 6. It is easy to dissolve an LLP as compared to a Company.

Salient features of LLP?

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