A few years back, businesses were only limited under company partnership or ownership. But with time, everything has changed, and the need for a limited liability was needed by the businesses as a prominent feature. Limited liability partnership Act 2008 had a great impact in legalizing the need for having limited liability in businesses.
In this article, we will talk about the limited liability partnership Act 2008 and its advantages and disadvantages, along with the procedure to set up a limited liability partnership in a company. All the issues and matters related to the limited liability partnership Act 2008 should be dealt with in business legal consultation.
Salient features of the Limited Liability Partnership Act 2008
Under the limited liability Partnership Act 2008, there are a few important legal terms that act as a catalyst to understanding the concept behind limited liability in the business.
- Under section 3 of the limited liability Partnership Act 2008, the concept of Corporate body has been defined.
- The corporate body, in simpler terms, means a company or a corporate entity that has some legal personality or is accepted by the legal fraternity through various provisions, such as registration of incorporation of the company at the office of the registrar.
- Under section 3 all the limited liability Partnership Act 2008, the concept of a separate legal entity has been defined.
- The separate legal entity, as per the limited liability partnership Act 2008, means that the company is an altogether different entity and has a legal personality other than the founders, owners, or partners.
- One of the famous cases of separate legal entities is Salomon versus Salomon Co. Limited.
- Section 3 of the limited liability Partnership Act 2008 says that a company is perpetual. The only condition in which a company may be considered dead is in the cases of winding up or bankruptcy.
- Perpetual succession means that the formation of the company and its end depends on the legal process.
- The common seal is also one of the most important features for the incorporation of the company under the Limited Liability Partnership Act 2008, as the signature of the authorized member is accepted as an authorized seal/stamp of the company.
Responsibility of a partner as per the Limited Liability Partnership Act 2008
Section 2g of the limited liability Partnership Act 2008 tries to define the term partner; in simple terms, partner means anything which has, per the agreement of the limited liability partnership, states ‘partner.’
- Notification is given by the partners to the registrar of the companies in the following scenarios-
- Any change in the agreement of the limited liability partnership and the changes in the structure of the business related to the same.
- If the company changes its name or residential address, then under the limited liability Partnership Act 2008, the notification has to be sent.
- If the company changes its registered office address, then the partner has to notify.
- Partner has to file the annual return statement of all the records and balance sheets as per the given provisions under the Limited Liability Partnership Act 2008.
- Partner in a company has to sign all the element documents which have been filled by the company as per the Limited Liability Partnership Act 2008.
- A partner carries the liability of the business in a manner that is advantageous for both parties along with there must be trust for the growth and will of the company and the partners.
- Partner has the responsibility to render all the relevant documents and information which can affect any company member.
The drawback of the Limited Liability Partnership Act 2008
- Under the limited liability Partnership Act 2008, the partners do not have an equal voting value, unlike what happens in a company where its shareholder has equal value.
- Under the unlimited liability Partnership Act 2008, there is no concept of equity or share as the company or the organization is itself closed between the Limited number of the partners, which makes it impossible for the others to buy shares and become a member of the organization. This makes it difficult to raise capital. Even in the one person company the liability remains on the founders and the difficulty of raising the capital is high.
How to set up an LLP as per the Limited Liability Partnership Act 2008
The first step to set up a limited liability partnership as per the limited liability Partnership Act 2008 is acquiring the digital signatures of all the partners of the company. The documentation of the partner’s signature is used for all the required online documents filing and verification.
After the first step, the company has to apply for the director identification number, which is allotted to them by the registrar of the companies.
After the director identification number is given to the company, a unique limited liability partnership reserve and a unique name are filed by the company, which is then approved by India’s Ministry of Corporate affairs.
The second last step is the company has to file for the incorporation of the limited liability partnership in which they have to fill out a form and submit it to the registrar along with the fees which have to be given.
The last step is filling out the agreement on the website of the Ministry of Corporate affairs. After which the approval of them will be carried out, but it should be filed within 30 days of incorporation of the company.
Limited Liability Partnership Act 2008 talks about the concept of incorporation of a company with the liability which is on the partners. The main aim of the Act is to provide protection and trust in the minds of the people, and it also encourages people to enter into partnerships in the incorporations of companies.
The issues related to the Limited Liability Partnership Act 2008 are a matter of business legal consultation, as these are a serious matter of incorporation of a company.