Limited Liability Partnership (LLP), which is limited liability partnership, is a company where all partners have limited liabilities. Here, one partner is not responsible for other partners diligence or negligence.
Features of LLP
- Limited liability protection is one of the main advantages in small and medium-sized businesses.
- It forms a simple working condition limiting liability to partners.
- The existence and running of an LLP does not solely depend on either of the partner. For example, the demise of a partner in Partnership Company may cause the company to disintegrate. Whereas, in LLP, it may not cease to exist in such a case. The partners of an LLP may change from time to time and it will not affect the LLPs continuity.
- The liability of partners in an LLP is limited to the amount of capital invested and there is no minimum limit to the amount of capital to be invested.
- In a partnership firm, the minimum number of partners is two and the maximum is limited to ten. However, in LLP, there is no upper limit to number of partners.
Removal or Resignation of Partner
Removal or resignation of a Partner from an LLP can happen for many reasons. A Partner may cease to exist as Partner in the LLP in the following scenarios:
- Death of the Partner
- Dissolution of the LLP
- If Partner is declared to be of unstable mind
- If Partner is declared as insolvent
A Partner may be removed from LLP only if the agreement provides such clauses or in the above-mentioned scenarios only. Until then, a majority of Partners cannot vote out a Partner from LLP.
Removal of Partner by majority will require filing a form within 30 days of the decision-making, duly signed by a designated Partner and the records being validated by a chartered accountant.
Resignation by a Partner requires a notice of resignation 30 days in advance of the intention by the Partner. Other Partners must accept the resignation, and all balances and debts must be settled as per agreement.
The procedure for removal or resignation of Partner from LLP is simple, although one should be prepared for the complexities it involves. Such as:
- Preparation of financial statements and division of assets among the Partners from the date of resignation
- Redrafting the LLP agreement
- Tax compliances applicable to retiring Partner