Ready Referencer On Private Companies and Limited Liability Partnerships

Ready Referencer On Private Companies and Limited Liability Partnerships

Ready Referencer On Private Companies and Limited Liability Partnerships

The inclination towards working together to do business and attain other commercial objectives has a long history. Partnership and companies has been the main mechanisms to achieve these goals.

 


Limited liability partnership is a partnership but as it is clear from the name itself, it has a limited burden of liability distinct from the traditional one where the liability was not limited and all the partners had to bear the burden in case of loss in business. An LLP have the benefits of both a Partnership and a company. In reality, It lies somewhere between the partnership and the body corporate. To understand it, we must first know about what is partnership and body corporate or a company. According to the Indian Partnership Act, a Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. Unlike an incorporated company a partnership does not have a legal personality of its own.

The inclination towards working together to do business and attain other commercial objectives has a long history. Partnership and companies has been the main mechanisms to achieve these goals.

 


Limited liability partnership is a partnership but as it is clear from the name itself, it has a limited burden of liability distinct from the traditional one where the liability was not limited and all the partners had to bear the burden in case of loss in business. An LLP have the benefits of both a Partnership and a company. In reality, It lies somewhere between the partnership and the body corporate. To understand it, we must first know about what is partnership and body corporate or a company. According to the Indian Partnership Act, a Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. Unlike an incorporated company a partnership does not have a legal personality of its own.

A limited liability partnership (LLP) is a hybrid corporate business vehicle that has a perpetual succession and separate legal entity. It not only provides the benefits of limited liability but also allows its partners the flexibility of organizing their internal structure as a general partnership. As a hybrid business entity, the LLP combines the limited liability features of companies with the operational flexibility of partnerships.

Difference between LLP and general partnership 


The first difference between an LLP and a partnership firm is that both are governed by different Acts. LLP is governed by LLP Act and Companies Act while partnership is governed by Indian partnership Act.

Another difference between partnership and an LLP is related to its entity. An LLP has a separate legal entity While the partnership has not any kind of separate legal entity.

An LLP practice perpetual succession while a general partnership firm does not observe perpetual succession. It means an LLP can still continue with its business regardless of possible partner changes or they can hold properties in their own name because they are independent entities separate from their individual partners while a standard partnership refers to its partners as the firm and not independent of their partners.

Difference between Company and LLP


The first different between a company and an LLP is as to the capital requirements. While no such minimum requirement is there for establishing an LLP. However there needed contribution as per the LLP Act.

In a company, all directors must have to obtain  DIN that is directors identification number while in case of an LLP only designated partners have to obtain the DPIN or the Designated Partners Identification Number.

Companies are mostly preferred for doing large business while LLPs are preferred mostly by professionals.

Listing of a company in stock market is possible while its not possible in case of an LLP.

In case of decision making for the day to day function of a company, the consent of shareholders are not required but in case of an LLP the consent of partners are required.

The requirement of having a common seal is mandatory in case of company but not so in the LLP. Its optional in the case of an LLP.

In a company, the authority to take decision to conduct business lies with the board of directors. Any individual director or member do not have any authority. On the other hand every partner has authority to conduct business in an LLP, unless the LLP Act provides otherwise.

Requirements of an LLP 

                                                                                                            
Who can be partner in an LLP?


Any individual or body corporate may be a partner in a limited liability partnership: Provided that an individual shall not be capable of becoming a partner of a limited liability partnership, if-

(a) he has been found to be of unsound mind by a Court of competent jurisdiction and the finding is in force;

(b) he is an undischarged insolvent; or

(c) he has applied to be adjudicated as an insolvent and his application is pending.

 
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