LLP is an acronym for the Limited Liability Partnership (LLP). LLP is an entity registered under the Limited Liability Partnership Act, of 2008. The liability of an LLP is restricted to its assets and the partner’s liability is limited to their share contributed in the partnership. Thus partner’s liability in LLP is similar to that of the shareholders of a Limited company, although they are directly managing the business like an unlimited partnership firm. Unlike the unlimited partnership, a partner of LLP is not liable for wrongful business decisions or misconduct of other partner/s.
Summary:
In an LLP, the internal governance structure is governed by the partnership agreement. Partners have some limited personal liability, but the managing partner is personally liable for LLP’s debts, unless he acted fraudulently, negligently, or without authorization for the partnership’s actions. LLPs are often used for professional services like law firms where partners are personally accountable but only for their own fault. One partner will not be held liable for the activities of the other. This means that each partner is protected from accountability for the wrongdoings of the other.
Annual compliance in the case of an LLP consists of the presentation of a statement of account and solvency along with an annual report under Section 34(2) and 35(1) of the LLP Act, respectively. In practice, the work and cost of compliance for LLPs is a fraction of that of a company registration.
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