What is the full form of LLP

LLP: Limited Liability Partnership

LLP stands for Limited Liability partnership. LLP is a mix of a traditional partnership, and a company as some of its features are similar to a traditional partnership and some matches with a company. For example, it provides the flexibility of a traditional partnership firm and benefit of limited liability of a company at a low compliance cost, which means, in an LLP, the members have the flexibility of organizing their internal management on the basis of a mutually arrived agreement, like a partnership firm, and also the partners have limited liability where each partner's liability is limited to the amount they put into the business, which means no one can touch their personal property if the firm incurs losses.

Furthermore, in an LLP, one partner is not responsible or liable for other partner's negligence, misconduct or wrongdoing. So, it a hybrid between a company and a partnership. Whereas, in some countries, an LLP is required to have at least one "General Partner" with unlimited liability.

In the companies, where the liability is unlimited, the personal assets of the partners can be sold out to compensate the losses or to pay the dues. To overcome this limitation, the Government came with the act LLP2008, which came into effect on 1 April 2009. So, LLP is a legal entity as it has to be registered with Registrars of Companies (ROC) and is governed by LLP Act 2008.

Features/Advantages of the LLP:

• Separate Legal Entity with limited liability: It is separate from its partners or partners are different from the firm. If a firm incurs heavy losses, no one can touch their personal property. Only the amount that they have invested in the business will be lost. The liabilities are limited and in proportion to the share of the partners in the capital. Furthermore, all the partners should be the agent of the Limited Liability Partnership but not of other partners.
• Easy to establish: The partners are required to visit the Registrar of Companies (ROC) office and sign the LLP agreement.
• Flexible: It offers the flexibility to makes changes. It allows the members the flexibility of organizing their internal management on the basis of the mutual agreement, as is the case in a partnership firm.
• Perpetual Existence: It also has perpetual succession, which means if any of the partners die or go bankrupt, the company will not dissolve.
• No Restriction on Max. Partners: There should be a minimum of 2 partners at least one of them should be a citizen of India, but there is no limit for maximum partners, and foreign partners are also allowed.
• Only For Profit: A LLP cannot be formed for charitable or non-profit purposes.

Furthermore, it is less costly to start an LLP, and easy to wind up as it requires less legal formalities, and also the partners cannot be held responsible for other partners' misdeeds, frauds, etc.