An Introduction to LLP
In business studies, what is a Limited Liability Partnership is a common question. It is a broad concept that forms a crucial part of partnership norms. LLP or Limited Liability Partnership is an alternative form of corporate business that offers benefits of limited liability to partners at minimal compliance costs. It is a newer concept in a business where partners have lesser financial obligations and limited personal liability in the firm.
What is the Meaning of LLP?
LLP, better known as Limited Liability Partnership, requires every partner to contribute to daily business operations while having limited responsibilities. In usual partnership firms, partners have unlimited liability towards the overall debts and legal concerns of business. Assets of these partners are also liable to be utilized for meeting any debt or liability of the firm. However, in LLP, partners are free from such huge liabilities.
Separate legal existence with a lesser extent of liabilities is what Limited Liability Partnership all about. Other than this, it has all the features that a regular partnership has.
What is the Limited Liability Partnership Act 2008?
The concept of LLP was introduced through the Limited Liability Partnership Act of 2008 by the Parliament of India. As mentioned in Section 3 of the LLP Act, a Limited Liability Partnership is a corporate body that is formed and incorporated under this act. A partnership is a legal entity separate from the partners.
What is an LLP Agreement?
LLP agreement is the mutual deal between all partners which decides the rights and duties of partners. In some firms, a partner can also modify the agreement if he wishes. If any such agreement has not been made by partners, mutual rights and duties in the partnership will be governed by the LLP Act of 2008.
What is Meant by the Limited Liability Partnership and Mutual Agency?
One of the significant differences between an LLP and a regular partnership firm is the presence of mutual agency. In a Limited Liability Partnership, independent actions taken by one of the partners does not hold other partners responsible for it. Just like other liabilities, liability for sharing the responsibility of each other’s actions is also limited.
All partners involved in it are agents of LLP, and their individual actions are not binding on one another. This is what is Limited Liability Partnership in business and partnership firms.
Salient Features of Limited Liability Partnership
LLP is characterized by some unique features and norms, which the partners have to abide by. Here are some of the salient features of Limited Liability Partnership.
LLP differs from a general partnership on aspects of succession. Unlike a general partnership, LLP firms can continue to exist even after retirement, death, withdrawal, or insolvency of any of the partners. It can also hold property rights and sign contracts in its name.
Separate Legal Entity
Just like any other company, entity, or corporation, LLP is a separate legal entity. While an LLP is entirely liable for its assets, partners involved in it hold limited liability when it comes to their contribution in the LLP. Creditors of an LLP are not the creditors of partners taking part in it.
Artificial Legal Person
In order to address various legal aspects, LLP is turned into an artificial legal person. This is done through a proper legal procedure, after which an LLP holds all rights of an individual. It is intangible yet has equal significance in dealing with legal complications.
The understanding of what is Limited Liability Partnership Act 2008 remains incomplete without being aware of the common seal under Section 14(c). It is mentioned that an LLP can have a common seal if it wishes to. The Act does not mandate it. However, if a firm decides to have a common seal, it is mandatory that the seal remains under the custody of a responsible authority. At least two LLP partners have to be present during the affixation of the common seal of an LLP.
Minimum and Maximum Number of Partners in an LLP
An LLP must include at least 2 partners. Out of two designated partners, at least one has to be a resident of India. When it comes to the maximum number of partners in an LLP, there is no specified number.
The Central Government of India holds sole power to investigate matters related to LLP firms and disputes. The authority can also appoint a competent authority to investigate the matter if they feel necessary.
An LLP partnership cannot be formed for charitable work or non-profit purposes. Every LLP firm must carry on a lawful business with the motive of earning returns in the form of profit.
Business Management and Business Structure
Partners included in an LLP firm hold the right to manage a business. However, the right to deal with legal issues lies only with designated partners of the firm.
Conversion into LLP
The Limited Liability Partnership Act gives the right to any private firm, start-up, or unlisted company to convert into an LLP firm.
Compromise or Arrangement
Compromises or arrangements related to the merging or amalgamation of partners have to be done in accordance with the LLP Act.
More about Limited Liability Partnerships - LLP
Learning might seem like an easy day-to-day routine process however, it stands unique for everyone. Each individual has their respective learning style.
While preparing for any exam, it is essential to identify what suits your mental capacity the best.
This again might seem to be a difficult thing to do. But, the ones who can crack it, have no limits and can always push themselves forward.
The following points are certain ways that can help ease out the learning process and also make retrieval efficient.
Students shall be following them if they wish to kick off the limiting beliefs and ace learning.
Let's get started and learn some of them ahead of time.
Visualize along with Reading
If you are someone for whom imagination, pictures and art seem appealing then this is the method for you. Visualizing what one is reading makes comprehension easy and saves time. Individuals can remember easily when they are able to associate a picture with the given data. Techniques like mind mapping can help visualize better. Mind mapping is a method where one uses flowcharts, statistical diagrams, Venn diagrams etc. as a tool to represent theoretical information. A classic example of this is the food chain. Often colour coding is also used to increase association with these mind maps.
Practice by Writing to Score Good Marks in Theory
Practicing, also called maintenance rehearsal in psychology, is another way to enhance the learning process. Writing down what we read gives it a double-check and also one is tangibly able to recognise what they just read/learnt. Writing down the text not only helps one revise but also helps in identifying the missing links. One can add more to the given as well. You can also write and read aloud simultaneously to aid auditory learning as well.
Practice as if you are Sitting in an Examination Center
Attempting an exam while in the comfort of your home is quite different from when one sits in the examination center. The environment then is steady but full of stress, there is a clock ticking on the head, an uncomfortable bench and a desktop in front of you. To be able to manage the pressure of that setting, it is crucial to try and practice giving exams in that environment. One can create this easily at home by giving mock tests while sitting on a chair and table, using a stopped clock with minimal noise, just a glass of water beside. The results are more effective when one practice gives mocks in the same time slot as the actual exam. This will help train the brain to work effectively at the time of the real examination.
Create Hurdles for Yourself
Often practicing for an exam can get monotonous. It is the same syllabus with the same type of questions. Students tend to get bored and even the brain stops registering the information after a point. Challenging one’s brain with brainteasers, different kinds of questions, abstract thinking concepts, puzzles, subjective questions, etc. can help learn better. These things help the mind go on. Apart from the subject-related tricks, individuals can also play mind-challenging games like Chess and Sudoku that not only help increase concentration but also teach strategies to see things differently. Students who use these methods are known as kinaesthetic learners.
Make Short Notes which will help Score Good Marks in Theory
Making notes while studying is a very helpful tool in learning better. However, note-making, though underrated, is a very important skill. Notes are a comprehensive understanding of what one reads. Short notes can be made beside the actual text using sticky notes or adding extra paper along the text to ease revision later. Colour coding these notes help enhance the retrieval process. These notes can also contain some extra things that are absent in the given data. For instance, one can attach reference links, page numbers of books, other anecdotes that one is reminded of while revising.
FAQs on Limited Liability Partnerships - LLP
1. Where can I get detailed study notes for the subject of law?
To get detailed study notes of any of the topics of Law, you shall check out the website of Vedantu or download the mobile app. Reading them intensively can help you gain a better understanding of the concepts and you can later, use the technique of writing and learning to memorize the content better.
2. Can I get explanatory notes for topics of Accountancy?
Yes! You shall visit the website of Vedantu to get study notes for all the topics. This would not only help you understand and strengthen your concepts but will also help you test yourself and check your weaker areas.
Apart from notes and tests, you can also choose your mentor who would not only guide you with the best advice but will always help you pave an effortless learning path that would make sure that you continue to excel.
3. What do you mean by a Limited Liability Partnership?
LLP or Limited Liability Partnership is an alternative corporate business form that offers the benefit to its partners of holding limited liability at low compliance costs. It is basically a combination of a company and a partnership.
4. What is the LLP Firm's Maximum Limit of Partners?
There is no limitation on the maximum number of partners in an LLP firm, but it must have at least two individuals as partners. The Act lays down all details regarding partners in an LLP firm.
5. What is a Limited Liability Partnership Firm?
A limited liability firm is where partners have mutually agreed on the LLP terms. Any start-up or unlisted company is eligible to convert into an LLP firm through the formalities specified in the Limited Partnership Act of 2008.