Introduction
With the development of the Indian economy, the part represented by its capitalists and its industrial and specialized human resource has been recognized worldwide. It is seen fit that entrepreneurship, understanding and risk resources come together to provide further impetus to India’s economic development. In this context, the need for an innovative corporate structure that provides a substitute has been felt. It must be a substitute for conventional society. It must contain unlimited personal liability on one side, and the controlling organization based on limited liability company law on the other. This will make it easier for specialized knowledge and the capitalist company to unite, organize and function in an agile, pioneering and well-organized way.
Thus, the Limited Liability Company is seen as a substitute corporate form of the business environment. This form of business offers the advantages of limited liability while giving its members the flexibility to organize their internal organization as a partnership. The company must be founded on an agreed contract. Due to the flexibility it offers in operation and structure, the LLP is suitable for both small businesses and investments through venture capital. Therefore, with this background in mind, Parliament passed the Limited Liability Companies Act 2008, which was agreed to by the President on January 7, 2009.
Law Regarding Incorporation of an LLP
The procedure for establishing an LLP is very simple. The Registrar of Companies has the authority and control over the integration. The following steps are required:
- Make a decision regarding Partners and Named Partners.
- Acquire the designated partner identification number along with a digital signature certificate.
- Choose a name for your LLP and check its availability.
- Summarize the LLP contract.
- Finally, you will need to present the Agreement together with the different incorporation documents to obtain the Certificate of Incorporation.
Current Position of LLP Law in India
The LLP Law grants for the creation and constitution of limited liability companies and related and complementary issues to them. The Law expresses an LLP as a legal person created and included in Chapter III of the Law. It presents in an LLP the position of a disconnected legal body. All other characteristics are also conferred by law such as perpetual succession and the ability and control to sue and be sued. An LLP is required to also assign at least two partnerships as named partners. Of these two partners, one must be an Indian individual.
If a change in partners occurs, it will have no effect on the survival, privileges or liabilities of the LLP. The association between the partners, with any admission and termination of the LLP, is administered primarily through the restricted liability company agreement. But if there is no such agreement, they are governed by the rules contained in the First Annex of the Law.
Termination of concern for the association can also be conveyed by death or by suspension of the LLP. The reasons for termination are more equivalent to the liquidation of a corporation. Termination may be voluntary or by court order.
Liability of LLP and Partners
The Law at the beginning, in addition to granting the separate legal features, says that every partner is a representative of the LLP. But every partner cannot be a representative of another partner. This is a clear change from the current form of association. Here the agency relationship rule is extended even further. In some way it establishes the responsibility of the partners for the acts of other partners.
Despite the likely demise, the Indian LLP Law appears to lag behind the Minnesota Model. The personal liability of a partner is excluded under Section 28(1). Liability may be direct or indirect but is still excluded by an obligation. It is not awarded solely for the mere fact of being a member of the LLP. The Act further states that a duty of the limited liability company, even if it occurs outside of an agreement or otherwise, is the sole responsibility of the LLP. This gives an Indian LLP the same status as a company within the meaning of Section 3 of the Companies Act.