- Prime feature of Limited Liability Partnerships.
A Limited Liability Partnership (‘LLP’) is an alternative corporate business which combines the flexible structure of a partnership with the benefits for its partners of limited liability.
A short resume of it’s key factors are given below for Limited Liability Partnership (LLP) benefit.
The LLP has a separate legal entity from their Members.
They have the benefit of limited liability for their Members.
They are taxed as a partnership companies.
They have the organizational flexibility as of a partnership company.
Any agreement between the Members governing the operation of the LLP is a private document which is remains confidential only to its Members.
The LLP at the very least must at least two “designated” Members.
Their “trading disclosure” requirements are similar to those of a regular company.
The same must be registered at Companies House.
The accounting and filing requirements are similar to those of a company.
They have the power to create floating charges.
Prime Features of registration of LLP ?
An LLP, at the point of incorporation it will be provided with a unique registration number by Companies House, like a limited company.
This registration number will continue to be the same throughout its lifetime, even in the advent of LLP changing its name.
Very similar restrictions apply to names that can be registered for LLPs as apply to limited companies.
An LLP itself has unlimited capacity and it can do anything This includes holding property, entering into contracts, suing and being sued.
Changes in the membership of an LLP do not affect its continued existence. However, it should be noted that if the membership of the LLP goes below two Members, and the LLP continues to trade for more than 6 months with just one Member, the benefits of limited liability will be lost.
The Members of an LLP act as its agents and only have liability up to the amount they have contributed to the LLP – in particular their capital contribution and undrawn profits.
This is a significant advantage over a traditional partnership where the partners generally have unlimited liability.
However, under specific circumstances in which the personal liability of a Member may be extended. These include:
Negligence - if a Member is negligent and a third party suffers loss as a result, then the third party could try to take action against that individual Member as well as the LLP.
However, any such action would undermine the principle of limited liability and the Courts are generally reluctant to find individual Members liable for their own negligence.
Wrongful/Fraudulent Trading - wrongful and fraudulent trading provisions apply to LLPs in substantially the same way that they apply to limited companies.
CS.A.Maniraj.,B.Com.,ACS.,CA(Fin), Independent Director
Certified CSR Professional., Certified GST Professional.