What a Limited Liability Partnership Is

The idea

A limited liability partnership is a partnership that is a body corporate. It has the internal flexibility of a firm and the separate legal personality and limited liability of a company, and it exists because businesses wanted both.

The Act's own statement

Section 3 of the Limited Liability Partnership Act, 2008:

(1) A limited liability partnership is a body corporate formed and incorporated under this Act and is a legal entity separate from that of its partners.

(2) A limited liability partnership shall have perpetual succession.

(3) Any change in the partners of a limited liability partnership shall not affect the existence, rights or liabilities of the limited liability partnership.

Three sub-sections, and each says something a firm cannot say.

A body corporate and a separate legal entity. A firm under the 1932 Act is not: section 4 of that Act calls the partners collectively "a firm" and gives it no personality.

Perpetual succession. The LLP survives the death, retirement or insolvency of a partner.

A change of partners changes nothing. A firm, by contrast, is technically reconstituted whenever a partner comes or goes.

The Partnership Act does not apply

Section 4:

Save as otherwise provided, the provisions of the Indian Partnership Act, 1932 (9 of 1932) shall not apply to a limited liability partnership.

So an LLP is not a partnership in the 1932 sense at all, and none of the mutual agency, unlimited liability or registration rules of that Act reaches it. A candidate who answers an LLP question out of the Partnership Act has answered the wrong question.

Who may be a partner

Section 5:

Any individual or body corporate may be a partner in a limited liability partnership

with a proviso disqualifying an individual who is of unsound mind, is an undischarged insolvent, or has applied to be adjudicated an insolvent and his application is pending.

A body corporate may be a partner. A company can be a partner in an LLP, which it cannot conveniently be in a firm.

Minimum number of partners

Section 6(1): every LLP shall have at least two partners.

Section 6(2) is the sanction, and it is precise:

If at any time the number of partners of a limited liability partnership is reduced below two and the limited liability partnership carries on business for more than six months while the number is so reduced, the person, who is the only partner of the limited liability partnership during the time that it so carries on business after those six months and has the knowledge of the fact that it is carrying on business with him alone, shall be liable personally for the obligations of the limited liability partnership incurred during that period.