Q. The Limited Liability Partnership Act, 2008 provides for creation of LLP firms that combine the advantages of ease of running a Partnership and separate legal entity status and limited liability aspect of a Company. What advantages are offered by LLPs? - One partner in an LLP is not responsible or liable for another partner's misconduct or negligence
- LLPs have comparatively lower cost of formation and lesser compliance requirements
- LLPs have no requirement of minimum capital contributions
Select the correct option from the codes given below:
Answer:
1, 2 & 3
Notes: LLP is a hybrid structure that combines the elements of a partnership firm and a company and ensures that liability of the partners is limited. This structure is expected to encourage smaller business entities undertake larger ventures as the liability of the partners is limited. The LLP Act, 2008, was notified in April, 2009. LLP combines the advantages of ease of running a Partnership and separate legal entity status and limited liability aspect of a Company. Here are some of the main features of a LLP:
- LLP is a separate legal entity separate from its partners, can own assets in its name, sue and be sued.
- Unlike corporate shareholders, the partners have the right to manage the business directly
- One partner is not responsible or liable for another partner's misconduct or negligence.
- Minimum of 2 partners and no maximum.
- Should be 'for profit' business.
- Perpetual succession.
- The rights and duties of partners in LLP will be governed by the agreement between partners and the partners have the flexibility to devise the agreement as per their choice. The duties and obligations of Designated Partners shall be as provided in the law.
- Liability of the partners is limited to the extent of his contribution in the LLP. No exposure of personal assets of the partner, except in cases of fraud.
- LLP shall maintain annual accounts. However, audit of the accounts is require only if the contribution exceeds Rs. 25 Lakhs or annual turnover exceeds Rs.40 lakhs.
A LLP is indeed advantageous because of comparatively lower cost of formation, lesser compliance requirements, easy to manage and run and also easy to wind-up and dissolve, no requirement of minimum capital contributions, partners are not liable for the acts of the other partners.