Any individual or a body corporate may be a partner in Limited Liability Partnership. A body corporate means a company registered under Companies Act 1956, as well as a Limited Liability Partnership registered under Limited Liability Partnership Act 2008 or Limited Liability Partnership registered outside India and a company incorporated outside India. It does not include a corporation sole and a cooperative society.
Any individual shall not be capable of becoming a partner of Limited Liability Partnership if – (a) he has been of unsound mind, (b) he is an un-discharged insolvent or has applied to be adjudicated as an insolvent and his application is pending (Section-5).
Features
The features of a limited liability partnership are as follows:
i) Body Corporate: The Limited Liability Partnership is a body Corporate and a legal entity separate from its partners, Section Sec 3 (1). Any two or more persons, associated for carrying on a lawful business with a view to profit, may subscribe their names to an incorporation document and filing the same with the Registrar, form a Limited Liability Partnership.
ii) Perpetual Succession: The Limited Liability Partnership has a perpetual succession, Sec 3(2). Any changes in the partners are not to affect the existence, rights and liabilities of limited liability partnership.
iii) Mutual Rights and Duties: The mutual rights and duties of partners inter se and those of the Limited Liability Partnership and its partners are governed by an agreement between partners or between the Limited Liability Partnership and partners subject to the provision of the Act.
iv) Separate Legal Entity: The Limited Liability Partnership has a separate legal entity, liable to the full extent of its assets, with the liability of the partners being limited to their agreed contribution to the Limited Liability Partnership which may be of tangible or intangible nature or both. No partner would be liable on account of independent or unauthorized actions of other partners or their misconduct. The liabilities of the Limited Liability Partnership and partners who are found to have acted with intent to defraud the creditors or for any fraudulent purposes shall be unlimited for all or any of the debts or liabilities of the Limited Liability Partnership.
v) Number of Partners: Every Limited Liability Partnership 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 maximum number may be any. If number falls below two partners, the only partner left, if carries on business for more than six months shall be personally liable for the obligation of Limited Liability Partnership incurred during that period [Sec-6 (g)].
vi) Annual Account and Audit: The Limited Liability Partnership is under obligation to maintain annual accounts reflecting time and fair view of its state of affairs. A statement of accounts and solvency shall be filed by every Limited Liability Partnership with Registrar every year. The accounts of Limited Liability Partnership shall be audited provided that the central government may exempt any limited liability partnership from this requirement.
vii) Application of other laws: The Indian Partnership Act 1932, shall not be applicable to Limited Liability Partnership (Sec-4). However, central government can apply some provisions of Companies Act.
viii) Conversion: A partnership firm, a private company and unlisted public company can be converted into Limited Liability Partnership.
