A limited liability partnership (LLP) is a business structure in which some or all of the members (depending on the state) have limited responsibility. As a result, it has aspects of both partnerships and corporations. In an LLP, one partner is not responsible or liable for the misbehaviour or carelessness of another partner.
Some partners in an LLP have limited responsibility, similar to that of a corporation's shareholders. One partner must be a "general partner" in some states, which means he or she is ultimately accountable for the business' debts as well as any lawsuits, such as personal injury or breach of contract, brought against the business. Partners, unlike corporate stockholders, have direct control over the company. By contrast, the laws of some state charters require corporation shareholders to elect a board of directors.
The issue of LLP has been a matter of discussion in India for over a decade now. The need for introduction of a LLP legislation was felt for a long time but the process gained momentum only when the second Naresh Chandra Committee submitted its report in July 2005. It was introduced by the Ministry of Corporate Affairs on 15 December 2006.
The Limited Liability Partnership (Amendment) Rules, 2009 have been revised by the Ministry of Corporate Affairs. The MCA has established LLP Form 24, which allows an LLP to be closed by submitting an application to the Registrar for the name of the LLP to be struck off. The process of closing a legal business used to be lengthy and complicated. The procedure has now been simplified and made easier with the introduction of LLP Form 24.
With the permission of 3/4th of the partners, LLPs can readily be wound up. To begin the liquidation procedure, a majority of the authorised partners must declare that the LLP is debt-free or capable of paying all debts in full. The LLP partners must state that the LLP is not being wound up in order to defraud anyone. If there are assets in the LLP, a value of such assets must also be submitted. The liquidation of the LLP will occur on the date when a resolution for voluntary winding up is passed.
Once the winding-up procedure begins, a firm can no longer conduct business except to complete the liquidation and distribution of its assets. The corporation will be dissolved and effectively cease to exist at the completion of the process.
Forming is simple- Creating an LLP is a simple procedure. It is not as sophisticated or time-consuming as a company's process. The minimum amount of fees for forming an LLP is Rs 500, with a maximum value of Rs 5600 available.