Introduction to a new corporate form-LLP
Limited Liability Partnerships (LLP) have been proposed as a new form of business structure. It provides an alternative to the traditional partnership where partners are exposed to unlimited personal liability and the statute-based governance structure of limited liability companies. LLP like a private limited company is a corporate body having a distinct legal entity separate from its partners. It has perpetual succession and a common seal, unlike traditional partnership firms.LLP adopts a corporate form combining the organizational flexibility of a partnership with the advantage of limited liability for its partners.
The world over Limited Liability Partnerships offer alternative business mediums and India, a transforming economy, cannot be far behind. Of late, India is considered to be a superpower in the service sector and has achieved phenomenal growth.
The share of the service sector in India's GDP growth is there for all to see and the dominant role played by the professionals cannot be denied. The professionals, hitherto, were operating in the traditional environment of partnerships under the Partnership Act of 1932. The need to provide a corporate form to the professionals was felt and the demand for making available the alternative of limited liability partnership echoed all around.
The LLP, as it is commonly known, is a global phenomenon and India has been able to introduce this concept in line with the need of the working populace. In the growing Indian economy acknowledged internationally. It is felt opportune that entrepreneurship, knowledge, and risk capital combine to provide a further impetus to India's economic growth. In this background, a need has been felt for a new corporate form that would provide an alternative to the traditional partnership, with unlimited personal liability on the one hand, and, the statute-based governance structure of the limited liability company on the other, in order to enable professional expertise and entrepreneurial initiative to combine, organize and operate in a flexible, innovative, and efficient manner.
The LLP(Limited Liability Partnership) is viewed as an alternative corporate business vehicle that provides the benefits of limited liability but allows its members the flexibility of organizing their internal structure as a partnership based on a mutually arrived agreement.
The LLP form would enable entrepreneurs, professionals, and enterprises providing services of any kind or engaged in scientific and technical disciplines, to form commercially efficient vehicles and also be a suitable vehicle for small enterprises and for investment by venture capital.
The Government of India was up to the task and introduced the Limited Liability Partnership Bill in 2006. The Bill was referred to the Parliament Standing Committee, which submitted its report to the Lok Sabha on 27th November 2007. The Government chose to withdraw the Bill of 2006 and reintroduced it in 2008 after taking into consideration the recommendations of the committee.
The Limited Liability Partnership Bill, of 2008 was passed by the Parliament and received the assent of the President on 7th January 2009 and it became the Limited Liability Partnership Act, of 2008. The Act has been notified to be effective from 31st March 2009. The LLP rules have also been notified effective from 1st April 2009. It is a body corporate with the limited liability of partners. Liability is limited to the capital contribution made by them.
