Topic 16 Salient Features of LLP

Module Overview

This topic provides a comprehensive, examination-focused enumeration and explanation of all the salient features of an LLP under the LLP Act, 2008. These features collectively define why the LLP is a unique business vehicle — different from both the traditional partnership and the company. Mastering these features is foundational for any LLP-related examination question.

12+

Core Features

3,4,6,7,27

Source Sections

3

Key Distinctions

High

Examination Weight

Statutory Basis: Section 3(1)

An LLP is a body corporate — it exists as a juristic person independent of its partners. It can own property, sue, be sued, and enter contracts in its own name. Partners have no direct right over LLP property.

Statutory Basis: Section 3(2)

The LLP continues to exist regardless of changes in partners — death, insolvency, or retirement of a partner does not dissolve the LLP. Only winding up under Sections 63–65 ends the LLP's existence.

Statutory Basis: Section 27

A partner's personal liability is limited to their agreed contribution to the LLP. Partners are not liable for LLP obligations beyond this. Exception: personal unlimited liability for fraud (Section 30).

Statutory Basis: LLP Act (Section 4 excludes IPA Section 18)

Unlike a partnership, no partner is an agent of another partner. Each partner is only an agent of the LLP for its business. One partner's wrongful act binds the LLP, not other partners personally.

Statutory Basis: Sections 22–23; Schedule 1

Partners have maximum flexibility to design their governance through the LLP agreement. If no agreement is made, Schedule 1 default rules apply — which cover management, profit sharing, meetings, and partner rights.

Statutory Basis: Section 6

An LLP must have at least two partners at all times. If the number falls below two for more than six months, the remaining partner becomes personally liable for obligations incurred during that period.

Statutory Basis: Section 7

Every LLP must have at least two designated partners, both individuals, with at least one being a resident of India (≥120 days stay per financial year). They hold specific compliance responsibilities.

Statutory Basis: LLP Act (no provision)

There is no statutory minimum capital for an LLP — a Rs. 1 contribution is technically sufficient. This makes the LLP form accessible to micro and small enterprises.

Statutory Basis: Sections 11–12

An LLP comes into existence only upon registration and issuance of a Certificate of Incorporation by the Registrar. Unlike an IPA firm, an unregistered LLP cannot exist.

Statutory Basis: Section 4

The entire Indian Partnership Act, 1932 is expressly excluded from applying to LLPs — save as otherwise provided. The LLP Act is a complete, standalone code.

Statutory Basis: Sections 22–23; Schedule 1

Partners may agree on any profit-sharing ratio, management structure, meeting schedule, capital contribution, and decision-making process — unconstrained by company law governance requirements.

Statutory Basis: Sections 34–35

LLPs must maintain accounts on a double-entry basis, file a Statement of Account and Solvency (Form 8) by October 30, and an Annual Return (Form 11) within 60 days of financial year closure.

The Three Unique LLP Features

1. No Mutual Agency: Neither an IPA firm (which has mutual agency) nor a company (where directors are agents of the company, but in a fundamentally different sense) has the exact "no mutual agency between partners" concept of the LLP.

2. Designated Partners: No IPA firm has designated partners. Companies have directors but these are fundamentally different — they are not partners and do not hold an ownership stake by virtue of their role.

3. Schedule 1 Defaults: IPA applies its entire 1932 Act when there is no partnership deed. Companies Act requires mandatory Articles of Association. The LLP's Schedule 1 default rules offer a middle path — minimal but sufficient.

⚖ Hariram Taneja v. ROC (Delhi LLP) Delhi HC (2018)

Held: The court tested the "LLP Agreement governs internal relations" feature against the statutory compliance requirements for designated partners. The court held that where the LLP agreement attempted to relieve a designated partner of their statutory compliance duties, such a clause was void as contrary to the Act. Salient features of an LLP — especially statutory duties — cannot be contracted away.

Principle: The salient features of an LLP codified in the Act are non-derogable statutory minimums — LLP agreement cannot reduce statutory rights/duties below the Act's floor.

📌 EXAM TIP: Examination format: "Enumerate the salient features of a Limited Liability Partnership under the LLP Act, 2008." Expected answer: At least 8–10 features with brief statutory support. The three most important to mention are: (1) Body corporate/separate legal entity (Section 3); (2) Limited liability of partners (Section 27); (3) No mutual agency (Section 4 excludes IPA Section 18). The "no minimum capital" feature is often missed but is examiner-noticed.

✔ PRACTICAL NOTE: A client setting up a start-up asks: "What's the cheapest way to get limited liability in India?" Answer: An LLP — no minimum capital (Re. 1 suffices technically), lower ROC fees, no mandatory audit below threshold, no compulsory AGM. The salient features of the LLP align exactly with the needs of a bootstrapped small business.

Feature

Section

One-Line Essence

Body corporate

S.3(1)

Separate legal entity from partners

Perpetual succession

S.3(2)

Continues despite partner changes

Limited liability

S.27

Partners' personal assets protected

No mutual agency

S.4 (excludes IPA S.18)

Partners not agents of each other

Min 2 partners

S.6

Must maintain at all times

Designated partners

S.7

Min 2; individuals; 1 Indian resident; DPIN

No min capital

Act silent

Re.1 technically sufficient

Mandatory registration

S.11–12

Existence begins with Certificate of Incorporation

IPA excluded

S.4

Complete standalone code

LLP Agreement

S.22–23

Flexible governance; Schedule 1 if absent