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WHY LIMITED LIABILITY PARTNERSHIP ?
With the emergence of time when people were forged by the unethical structure of partnership firms and were not diligent enough to afford the compliance of that of a company, the Ministry of Corporate Affairs brought the concept of Limited Liability Partnership Firms into picture i.e. an entity which offers management flexibility coupled with less compliance to follow.
As per the LLP Act 2008 an
- “LLP is defined as that business entity where having two Designated Partners is minimum requirement and such partners had their liability limited to their contribution towards the LLP”.
- LLP combines the advantages of both the Company and Partnership into a single form of organization and offers a hybrid structure.
- LLP as a business Structure proved itself to be a midway for those who were operating partnership firms, but wanted to work in the organized sector under a legally compliant structure with world recognition restricted liability.
- The greatest advantage which LLP offers is the flexibility to do business.
- Instead of being bound by legal provisions, LLP’s are free to create their own rules of management, which was not possible in case of companies. As result of which, a lot of companies have started to convert themselves into LLP.
- In case of LLP, the LLP Agreement is of fundamental importance. The Agreement defines the rules of the games, terms and conditions of the relationship vis-à-vis the LLP partners and the partners’ inter-se. The entire LLP functions on the basis of the LLP agreement.