Limited Liability Partnership

Limited liability partnership also referred as LLP’s  is governed under the limited liability partnership Act of 2008. However in India LLP was introduced in April 2009 to provide partnerships with the limited liability previously only available to companies.

It  is a combination of both partnership and corporation since it has features of both these forms. In this form of partnership  the partners have limited liability in the company which means that the personal assets of the partners  are not used for paying off the debts of the company.

Hence, in the event of losses or debt the company will be liable to bear it & the individual members shall not be liable for such losses or debts.



  1. Liability of Partners– The liability of Partners is limited to their contribution of share in the
  2. Separate Legal Entity – Unlike regular partnership firms, limited liability partnerships are treated as separate legal entities.  It can enter into a contract and acquire property in its name.
  3. Limit of Partners – A minimum number of 2 partners are required to form a LLP & there is no limit on maximum number of partners.
  4. Audit of Accounts – LLP shall maintain annual accounts where audit of the accounts is required only if the contribution exceeds Rs. 25 lakh or annual turnover exceeds Rs. 40 lakh.


The following are the main advantages of a limited liability partnership :

  • Limited liability protects the member’s personal assets from the liabilities of the business.
  • An LLP allows its members to join and depart with no tax burden.The members of an LLP are taxed directly as if they had earned their share of the LLP’s profits themselves.
  • Forming an LLP is an easy process. It is not complicated and time consuming like the process of a company. The minimum amount of fees for incorporating an LLP is Rs 500 and the maximum amount which can be spent is Rs 5600.
  • The life of the Limited Liability Partnership is not affected by death, retirement or insolvency of the partner.


  • If a partner wants to transfer his/her ownership rights then he/she has to obtain the consent of all the partners hence it is a difficult process.
  • Public disclosure is the main disadvantage of an LLP. Financial accounts have to be submitted to Companies House for the public record.
  • Due to various tax benefits and provisions many states restricts the formation of LLP in their states. 


Thus, in simple words Limited Liability Partnership  is a partnership form in which some or all partners have limited liabilities & is beneficial for both medium as well as small sized firms.

Accounting & Finance for Banking

Principles & Practices of Banking Module E Pdf

Module E PPB ePDFs available in our android app. Get them all at

Accounting and Finance for Banking Module A Pdf

Accounting and finance for bankers all ePDFs are available in our an app. Get them all at

Accounting and Finance for Banking Module A Pdf

Accounting and finance for bankers all ePDFs are available in our an app. Get them all at

Leave a reply

Please enter your comment!
Please enter your name here


Free Live Classes

More from author

Terms Associated With Bonds

What is a Bond ? A bond is one of the fixed income investment products that represents a loan given to a borrower by the...

Deferred Revenue Expenditure in detail

While revenue expenditure is a simple concept, deferred revenue expenditure is slightly more complicated. Deferred revenue expenditure  is an expenditure which is incurred in...

Comparison of NPV & IRR in detail

WHAT IS NET PRESENT VALUE (NPV) ? Net present value (NPV) is the difference between the present value of cash inflows and the present value of...

Present Value & Discounting

WHAT IS PRESENT VALUE ? PV (Present value ) is an important element in the time value of money, which forms the backbone of finance....