What is a Limited Liability Company?
Making payments efficiently, cost-effectively and surely are pivotal to every well-managed finance function. For this purpose we need to control the corporate spending. Manual purchasing processes are slow, time consuming and often lead to supplier account problems, over budget spending and an ever growing number of suppliers.
Limited Liability Partnership (LLP)
A Limited liability Partnership is a business entity that can be incorporated and closed legally as per the rules defined in Limited Liability Partnership Act 2008. It is a form of business that derives its features or characteristics from a partnership firm as well as a limited corporation. As the name suggests, the partners in a llp are not liable for the misconduct or negligence caused due to other partners. It can be started with minimum two persons and has no upper limit on the number of partners. Due to less capital requirement small businesses are more inclined towards such form of business. In llp audit is not mandatory until turnover of a llp reaches Rs. 40 lacs or capital reaches.
LLP is governed by the provisions of the Limited Liability Partnership Act 2008, the salient features of which are as follows: -
- The LLP shall be a body corporate and a legal entity separate from its partners. Any two or more persons, associated for carrying on a lawful business with a view to profit, may by subscribing their names to an incorporation document and filing the same with the Registrar, form a Limited Liability Partnership. The LLP will have perpetual succession.
- The mutual rights and duties of partners of an LLP inter se and those of the LLP and its partners shall be governed by an agreement between partners or between the LLP and the partners subject to the provisions of the LLP Act 2008 . The act provides flexibility to devise the agreement as per their choice.
- The LLP will be a separate legal entity, liable to the full extent of its assets, with the liability of the partners being limited to their agreed contribution in the LLP which may be of tangible or intangible nature or both tangible and intangible in nature. No partner would be liable on account of the independent or un-authorized actions of other partners or their misconduct. The liabilities of the LLP and partners who are found to have acted with intent to defraud creditors or for any fraudulent purpose shall be unlimited for all or any of the debts or other liabilities of the LLP.
- Every LLP shall have at least two partners and shall also have at least two individuals as Designated Partners, of whom at least one shall be resident in India. The duties and obligations of Designated Partners shall be as provided in the law.
- The LLP shall be under an obligation to maintain annual accounts reflecting true and fair view of its state of affairs. A statement of accounts and solvency shall be filed by every LLP with the Registrar every year. The accounts of LLPs shall also be audited, subject to any class of LLPs being exempted from this requirement by the Central Government.
- The Central Government has powers to investigate the affairs of an LLP, if required, by appointment of competent Inspector for the purpose.
- The compromise or arrangement including merger and amalgamation of LLPs shall be in accordance with the provisions of the LLP Act 2008.