A Limited Liability Partnership, popularly known as LLP, combines the advantage of both the company and partnership into a single form of organization and offers a hybrid structure.
To facilitate such structure which has been prevalent in other countries for quite some time, The Ministry of Corporate Affairs brought the concept of LLP firms into picture, i.e. an entity which offers more flexibility –coupled with less compliance to follow. Accordingly, the LLP act was executed in 2008, and the Indian Partnership Act would no longer be applicable to such firms. As per the Act, LLP is defined as the business entity where having two designated partners is minimum requirement and such partners have their liabilities limited to their contribution to the LLP. Just like a company an LLP is a separate legal entity having a perpetual succession. Thus LLP as a business structure proved itself to be a mid way between a partnership and a company for those who were operating partnership firms but wanted to work in the organized sector under a legally complied structure with restricted liability.
The best thing about LLP is that the LLP Agreement is of fundamental importance. The Agreement defines the rules of the games, terms and conditions of the relationship vis-à-vis the LLP and the partners inter se. The entire LLP functions on the basis of the LLP Agreement. This gives it an edge over Limited Companies which is bound by various legal provisions and cannot give the flexibility in management as an LLP offers.
Another unique feature of LLP is that like companies it can have Companies / Body Corporate, whether incorporated within India or outside as partners besides LLPs and individuals both registered/resident in India and abroad.
Service industries, small to medium scale business start ups, businesses which are financed by silent partners but run by few active partners find LLP as the most suitable business entity for their ventures.