Limited Liability Partnership is a New Form of Legal Business Entity that not only gives the benefit of Limited Liability but also Allow its Members the Flexibility of Organising their Internal Structure and LLP is a Separate Legal Entity with a Perpetual Succession and Common Seal.
Following are the benefits of Incorporting a LLP
1. Body Corporate Section 2(1)(d) of the LLP Act, 2008 provides that a LLP is a body corporate formed and incorporated under this Act and is a legal entity separate from that of its partners and shall have perpetual succession. Therefore, any change in the partners of a LLP shall not affect the existence, rights or liabilities of the LLP.
2. Limited Liability Every Partner of LLP is a Limited Liability.All the Partners will be liable for the business of LLP,but not liable for other Partners of LLP
3. Perpetual Succession The LLP can continue its existence irrespective of changes in partners. Death, insanity, retirement or insolvency of partners has no impact on the existence of LLP. It is capable of entering into contracts and holding property in its own name
4. Separate Legal Entity The LLP as a separate legal entity, is liable to the full extent of its assets but liability of the partners is limited to their agreed contribution in the LLP. In other words, creditors of LLP shall be the creditors of LLP alone.
5. Alternate Corporate Business Vehicle LLP is an Alternate Corporate Business Vehicle that not only gives the benefits of limited Liability but also allows it’s members the flexibility of Organizing their Internal Structure as Partnership based on Mutually arrived Agreement.
6. Mutual Agency No partner is liable on account of the independent or unauthorized actions of other partners, thus individual partners are shielded from joint liability created by another partner’s wrongful business decisions or misconduct. In other words, all partners will be the agents of the LLP alone. No one partner can bind the other partner by his acts.
7. Artificial Legal Person A LLP is an artificial legal person because it is created by a legal process and is clothed with all rights of an individual. It can do everything which any natural person can do, except of course that it cannot be sent to jail, cannot take an oath, cannot marry or get divorce nor can it practice a learned profession like CA or Medicine. A LLP is invisible, intangible, immortal (it can be dissolved by law alone) but not fictitious because it really exists
8. Common Seal A LLP being an artificial person can act through its partners and designated partners. LLP may have a common seal, if it decides to have one Thus, it is not mandatory for a LLP to have a common seal. It shall remain under the custody of some responsible official and it shall be affixed in the presence of at least 2 designated partners of the LLP.
9. Business for Profits Only The essential requirement for forming LLP is carrying on a lawful business with a view to earn profit. Thus, LLP cannot be formed for charitable or non-economic purposes.
10. Flexible Capital Structure A LLP is a New Form of Legal Business Entity Which has a Flexible Capital Structure that allows it’s Partners the flexibility of Organising their Internal Structure as Traditional Partnership.
11. Hybrid Between Company and Partnership A LLP Contains elements of both ‘A Corporate Structure’ as well as ‘A Partnership firm Structure’ So It is Called as hybrid between Company and a Partnership.
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