Limited Liability Partnership (LLP) Bill 2008 passed by the Parliament

The Limited Liability Partnership (LLP) Bill 2008 has been passed by the Parliament.

The Limited Liability Partnership format is an alternative corporate business vehicle that provides the benefits of limited liability of a company but allows its members the flexibility of organizing their internal management on the basis of a mutually arrived agreement, as is the case in a partnership firm.

For a long time, a need has been felt to provide for a business format that would combine the flexibility of a partnership and the advantages of limited liability of a company at a low compliance cost. As proposed in the Bill, LLP shall be a body corporate and a legal entity separate from its partners. It will have perpetual succession. While the LLP will be a separate legal entity, liable to the full extent of its assets, the liability of the partners would be limited to their agreed contribution in the LLP. Further, no partner would be liable on account of the independent or unauthorized actions of other partners, thus allowing individual partners to be shielded from joint liability created by another partner’s wrongful business decisions or misconduct.

Today, the world is in the grip of an unprecedented financial crisis, which is adversely affecting economies of most of the countries, including our own. In such a situation, availability of LLP as an alternative business vehicle to our trade and industry will be an important step. Service industry has grown considerably in India and it accounts for nearly half of our GDP. We believe that the LLPs would further contribute to the growth of the service industry in the future.