The inclination towards working together to do business and attain other commercial objectives has a long history. Partnership and companies has been the main mechanisms to achieve these goals. These are seen as an improvement over the sole trade business where one single individual with his own resources, skill and effort carries on his own business. Due to the limitation of the resources of only a single person being involved in the sole-trade business, a larger business requiring more investment and resources than available to a sole trader, cannot be thought of in such a form of business organization. In partnership or a body corporate, on the other hand, a number of persons could join their resources and labors and could start a much larger business, than could be afforded by any of these persons independently. In case of loss also the burden gets divided.

Limited liability partnership is a partnership but as it is clear from the name itself, it has a limited burden of liability distinct from the traditional one where the liability was not limited and all the partners had to bear the burden in case of loss in business. An LLP have the benefits of both a Partnership and a company. In reality, It lies somewhere between the partnership and the body corporate. To understand it, we must first know about what is partnership and body corporate or a company. According to the Indian Partnership Act, a Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. Unlike an incorporated company a partnership does not have a legal personality of its own. On the other hand a body corporate is a form of business in which the members join and pool their resources together to do business but the basic difference between a partnership and a corporation is that a corporation has a distinct legal personality different from its members. It also has a perpetual succession i.e. unlike a partnership, whether its partner exist or not it will to continue to exist.

Corporations and Partnerships have been a primary form of business structure for a long time now. Although, the two bodies of law have much in common, historically they differed sharply on the role of the contract and private ordering in structuring the firm. Partnership law encourages private ordering through bargaining by providing an agreement amongst partners. In contrast, corporate law historically has provided a mandatory framework for firm structure highly resistant to shareholders’ attempts to define their relationships through bargaining. Proponents of private ordering within firms prefer the freedoms of partnership law to the mandates of corporate law, and over time they have enjoyed success in extending the bargaining model from partnership law to corporate law. However, certain inherent limitations of both these forms of business have made them unsuitable for certain businesses. This ultimately led to the evolution of certain hybrid forms of business structures, limited liability partnership is one of them.

A limited liability partnership (LLP) is a hybrid corporate business vehicle that has a perpetual succession and separate legal entity. It not only provides the benefits of limited liability but also allows its partners the flexibility of organizing their internal structure as a general partnership. As a hybrid business entity, the LLP combines the limited liability features of companies with the operational flexibility of partnerships.

Genesis of the Bill
In India, the idea and requirement for legislation to provide for Limited Liability partnerships (LLPs) has been put forward from time to time by various Committees and Expert Groups, viz. Bhat Committee (1972), Committee to examine the adequacy of Institutional credit to SSI sector and related aspects (Nayak Committee, 1992), Expert Committee on Small Enterprises (Abid Hussein Committee, 1997) and Dr. S.P. Gupta Study Group on Development of Small Scale Enterprises, 2001.

In the recent past, the need for a separate legislation for LLPs has been recommended by the Committee on Regulation of Private Companies and Partnerships headed by Shri Naresh Chandra (2003) and Dr. J. J. Irani Committee on new Company Law (2005).

Why L.L.P. needed?
The second Naresh Chandra Committee Report provided the idea of the introduction of LLP which, it described, in a legal perspective, as a hybrid between a company and a partnership, but much closer to the private company form. The main reasons as provided by the Naresh Chandra committee were the “risk factor” advantage associated with such an enterprise and the enhanced global competitive advantage an LLP vehicle will offer to Indian professionals like lawyers, accountants, doctors, architects, and company secretaries. Firstly, LLP is looked upon, primarily, as “a form of business entity which permits individual partners to be safeguarded from joint liability created by another partner’s business decision or misconduct.” In an increasingly litigious market environment, the prospect of being a member of a partnership firm with unlimited personal liability is risky and unattractive and this is the chief reason why partnership firms of professionals, such as accountants, have not grown in size to successfully meet the challenge posed today by the international competition. In LLP the partners have limited liability in the same manner as in a limited company. Hence in the event of failure of business or tortuous matters, the liability is limited to the responsible partner. Moreover there would be no resort to attachment of personal assets of the other members, except the one who was personally liable for the negligence.

Secondly, professionals like lawyers, accountants, doctors, architects and company secretaries are prohibited from practicing under any incorporated form. But as Indian professionals are increasingly transacting with or representing multi-nationals in international transactions, the extent of the liability they could potentially be exposed to is extremely high. Hence, in order to encourage Indian professionals to participate in the international business community without apprehension of being subject to excessive liability, the need for having a legal structure like the LLP is self-evident.

Therefore we can say as a conclusion that the efforts for the making of limited liability partnership arisen from several factors, such as

increase in the numbers of litigation for professional’s negligence and the magnitude of claims;

the risk to a partner’s private property, when the claim exceeds the sum of the property and insurance cover of the partnership;

The expansion in the size of partnerships;

increase in specialization among partners and the coming together of different professions within a partnership

Difference between LLP and general partnership
The first difference between an LLP and a partnership firm is that both are governed by different Acts. LLP is governed by LLP Act and Companies Act while partnership is governed by Indian partnership Act.

Another difference between partnership and an LLP is related to its entity. An LLP has a separate legal entity While the partnership has not any kind of separate legal entity.

An LLP practice perpetual succession while a general partnership firm does not observe perpetual succession. It means an LLP can still continue with its business regardless of possible partner changes or they can hold properties in their own name because they are independent entities separate from their individual partners while a standard partnership refers to its partners as the firm and not independent of their partners.

Required number of minimum members is two in both the LLP and the Partnership but as far as the maximum number is concerned, it is 20 in the case of a general partnership while no such boundations is there in case of an LLP.

There must be a contribution from the partners as to the capital according to LLP Act in an LLP while no such requirement is there in a partnership. However it is required in a partnership that the stamp paper must be according to the capital to be invested.

As far as the partner’s identity is concerned, no such requirement in a partnership firm but in a LLP the designated partner must obtain the DPIN.

In an LLP, the liability is limited according to the contribution of the partners while in general partnership, the liability is unlimited. further the LLP can have one or more of its partners with limited liability as opposed to a partnership wherein all partners have unlimited liability – they are liable for the actions of all other member partners.

Difference between Company and LLP
The first different between a company and an LLP is as to the capital requirements. 1 lakh in case of a private company and 5 lakh in case of a public company is required as minimum capital to initiate a company. While no such minimum requirement is there for establishing an LLP. However there needed contribution as per the LLP Act.

In a company, all directors must have to obtain DIN that is directors identification number while in case of an LLP only designated partners have to obtain the DPIN or the Designated Partners Identification Number.

Companies are mostly preferred for doing large business while LLPs are preferred mostly by professionals.

Listing of a company in stock market is possible while its not possible in case of an LLP.

In case of a company, audit is necessary but in LLP audit is only necessary when the turnover exceeds 40 lakhs or the contribution of partners exceeds 25 lakhs.

In case of decision making for the day to day function of a company, the consent of shareholders are not required but in case of an LLP the consent of partners are required.

The requirement of having a common seal is mandatory in case of company but not so in the LLP. Its optional in the case of an LLP.

In a company, the authority to take decision to conduct business lies with the board of directors. Any individual director or member do not have any authority. On the other hand every partner has authority to conduct business in an LLP, unless the LLP Act provides otherwise.

Requirements of an LLP
Who can be partner in an LLP?
Any individual or body corporate may be a partner in a limited liability partnership: Provided that an individual shall not be capable of becoming a partner of a limited liability partnership, if-

(a) he has been found to be of unsound mind by a Court of competent jurisdiction and the finding is in force;

(b) he is an undischarged insolvent; or

(c) he has applied to be adjudicated as an insolvent and his application is pending.

Number of partners
(1) Every limited liability partnership shall have at least two partners.

(2) If at any time the number of partners of a limited liability partnership is reduced below two and the limited liability partnership carries on business for more than six months while the number is so reduced, the person, who is the only partner of the limited liability partnership during the time that it so carries on business after those six months and has the knowledge of the fact that it is carrying on business with him alone, shall be liable personally for the obligations of the limited liability partnership incurred during that period.

(3) The requirement is that minimum two partners should be there to form an LLP but there is no limit of maximum number of partner as is there in the case of a general partnership.

(4) In an LLP an individual or even a body corporate can be a partner.

Designated partners and the DPIN(designated partner identification number)

Every limited liability partnership shall have at least two designated partners who are individuals and at least one of them shall be a resident in India.

Provided that in case of a limited liability partnership in which all the partners are bodies corporate or in which one or more partners are individuals and bodies corporate, at least two individuals who are partners of such limited liability partnership or nominees of such bodies corporate shall act as designated partners.

"resident in India" means a person who has stayed in India for a period of not less than one hundred and eighty-two days during the immediately preceding one year.

The designated partner(DP) must have to obtain the designated partners identification number from the ministry of corporate affairs.

Responsibilities and liabilities on DP

The DP has no implied authority to conduct day to day business of LLP just because of his being a designated partner.

It is not essential that power to conduct business should be with him.

DP is responsible for compliances of the provisions of the LLP Act including filing of various returns and document specified in the Act.

He is liable to all penalties imposed on the LLP for any contravention of those provisions.

Name
The LLP must have either the acronym LLP or the words Limited Liability Partnership as the last words of its name.

No limited liability partnership shall be registered by a name which, in the opinion of the central Government is

Undesirable; or

Identical or too nearly resembles to that of any other partnership firm or limited liability partnership or body corporate or a registered trade mark, or a trade mark which is the subject matter of an application for registration of any other person under the Trade Marks Act, 1999(47 of 1999)

Salient features of LL.P.
The salient features of the act are as follows:
LL.P. can be formed by any two or more persons, associated for carrying on a lawful business, by subscribing their names to incorporation document.

The rights and duties of LLP and its partners shall be governed by an agreement between partners or between LLP and the partners.

The LLP will be a separate legal entity, liable of its assets, with liability of the partners being limited to their agreed contribution in the LLP.

Every LLP shall have at least two partners and shall also have at least two individuals as Designated Partners, of whom at least one shall be resident in India.

The LLP shall be under an obligation to maintain annual accounts reflecting true and fair view of its state of affairs.

The provisions of the Indian Partnership Act, 1932 not applicable on LLP.

Perpetual succession

Management structure is flexible

Legal and procedural requirement are simpler.

It provides for an organizational flexibility to the partners which is governed through the agreement.

The partners are able to modify their working arrangement to suit their business .There is no dependence on the statute for determining the internal working arrangement of the LLP.

one of the important advantages is the nature of an LLP, which is a unique combination of a partnership and a body corporate which provides the opportunity of growth of both the professional expertise and entrepreneurial initiatives in an innovative and flexible manner.

It also provides for the possibility of combination of two enterprises to build synergy between their respective expertises.
It has an easy compliance procedure for small enterprises.

Liability of partners
The Act at the outset, besides conferring the separate legal personality, clarifies that every partner is the agent of the LLP, but not of the other partners. the Indian LLP Act seeks to exclude the personal liability of a partner directly or indirectly for an obligation referred to in Section 27(3) solely by reason of being a partner of the limited liability partnership.? Section 27(3) in turn provides that “an obligation of the limited liability partnership whether arising out of contract or otherwise, is solely the obligation of the LLP”.? Nothing in the Act qualifies Section 27(3) as a reference solely to non-business? liabilities. This gives an Indian LLP, the same status as a company? within the meaning of Section 3 of the Companies Act so far the extent of personal liability of its partners is concerned. Whatever the nature of acts giving rise to the obligation in question, a partner (other than the partner who committed a wrongful act) of an LLP cannot be made personally liable. The extent of liability of partners under the LLP Act 2008 can therefore said to be following:

# The Partners are in an LLP are agents of the LLP itself but not of other partners.

# The liability of the partners in an LLP is a limited one and it is to be met out, in case of a loss, of the property of the Limited Liability Partnership and not of their individual properties.

# However there is provision of unlimited liability of partners but it is so, only in case of frauds.

# A partner is not personally liable, solely by reason of being a partner of the limited liability partnership.

# A partner of an LLP shall not be saved from the personal liability for his own wrongful act or omission, but again a partner shall not be personally liable for the wrongful act or omission of any other partner of the limited liability partnership.

# Reconstruction arrangement (Mergers, Amalgamation) and winding up of LLP

# Sec. 58 of the LLP Act provides for compromise, arrangements or reconstruction of LLPs.

Secs 59-61 talk about the winding up and dissolution of a limited liability partnership. Winding up of an LLP may be either voluntary or by the Tribunal. The various grounds of winding up of an LLP by a tribunal are as follows:
# If the LLP decides (by resolution) that the LLP would be wound up by the tribunal;

# If the number of partners of the LLP is reduced below two;

# if the LLP is unable to pay its debts;

# If the LLP has acted against the interests of the sovereignty and integrity of India, the security of state or public order;

# If the LLP has made a default in filing with the Registrar the statements of accounts and solvency or annual return for any five consecutive financial years;

# If the tribunal is of the opinion that it is just and equitable that the LLP be wound up.

Taxation of LLPs in India
Our LLP Act is silent regarding taxation of LLP under the income tax act. At international level, however LLPs are treated as a pass through entity and accordingly, income taxed is levied on partner and not on LLP. It is relevant to note that the Concept Paper on LLPs prepared by the Ministry of Corporate Affairs had recommended that LLPs should also be given a pass through status. However, in India, as per Finance Act 2009, for purpose of Income Tax. The LLP shall be treated and taxed like a partnership firm. In India, the Govt. has notified that LLP’s would be in the same manner as the partnerships i.e. it will be levied on the LLP itself and the partners shall be exempted from tax. There is also no tax on conversion of Partnership Firms into LLP’s. One important role to be played by the designated partner is that the income tax return should be signed and verified by the designated partners and where for any unavoidable reason the designated partner is not able to sign or where there is no designated partner, it can be done so by any other partner.

Lacunas in the Act
The continued application of Section 11 of the Indian Companies Act
Though there are many salient features of the LLP Act still there are some lacunas of the Act which are needed to be addressed for the success of the Act,Most significant amongst them appears to be the continued application of Section 11 of the Indian Companies Act, 1956, which requires that any entity which associates more than 20 persons must, of necessity, be registered as a company under the Companies Act, 1956. The limit on the number of partners was not prescribed which was seen by lawyers, among others, a forceful incentive to incorporate themselves into LLPs. This article also discuss against the obviousness of this assumption. In the same way, the authors have doubts that, if the LLP Act would be able to bypass the requirements of the Advocates Act and the Bar Council Rules and permit an association between "advocates" and "non-advocates".

Silent on tax treatment
Our LLP Act is silent regarding taxation of LLP under the income tax act. At international level, however LLPs are treated as a pass through entity and accordingly, income taxed is levied on partner and not on LLP. However, in India, as per Finance Act 2009 LLP will be treated as partnership firms for the purpose of Income Tax and will be taxed like a partnership firm Cannot be formed for charitable purposes It is another defect of an Indian LLP that it cannot be formed for charitable purposes. cannot come out with its IPO

Though the LLP is a separate entity distinct from its partner and have many similarities and benefits of a body corporate, still one of the lacunas of the act is that, It cannot come out with its IPO and raise money from the public which a company can easily do.

Conclusion
Some of the advantages of this form of business structure include low cost of incorporation, unlimited capacity separate legal entity, distinct from its partners and partner’s liability being limited to their agreed contribution. It has perpetual succession which has nothing to do with the partners exit or entry. The management also being flexible that it can be governed only by an agreement between partners. This form of entity is fusion, combining distinct features of a company with that of a traditional partnership.

For the better implementation and successful outcome even the company law authorities, which have to administer these LLP have been mandated to administer LLPs, albeit a lighter set of compliance and reporting is vis a vis companies. In a nut shell the LLP model has the potential to effectively act as an engine of growth for the economic development of country and is likely to foster the growth of professional services in the country. LLP, as an alternate business model, will encourage joint ventures and make Indian services sectors globally competitive.

Bibliography
# Bangia R. K. , contract II ,2009 edition, Allahabad law agency
# Dr. D.K. Jain, Law & procedure of limited liability Partnership, 2nd Edn, Bharat Law House
# Indian partnership Act, 1932
# Taxation of limited liability Partnerships by C.A. Pramod Jain, India corporate week, December 14-20, 2009
# Fifty-Eighth report, Standing Committee on Finance(2007-08) on The limited liability partnership Bill, 2006
# Aurobindo Saxena, Limited Liability Partnership: A New Business Model
# (33rd National Convention of Company Secretaries)
# Raghav Sharma, Limited Liability Partnerships in India( http://ssrn.com/abstract=1291854)
# CA V.M.V. Subba Rao, ( http://www.taxmann.com/taxmannflashes/flashart19-3-10_6.htm#_ftn94
# http://www.caclubindia.com/articles/a-to-z-of-limited-liability-partnership-8313.asp#.ujizs_kjpdc
# http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1423766 The indian llp law: some concerns for lawyers and cas by amit m. sachdeva and sachin sachdeva (posted on ssrn)