Limited Liability Partnership – Meaning & Overview

  • Setindiabiz Team
  • July 8, 2023
Definition of limited liability partnership
A Limited Liability Partnership is the most preferred choice of Partnership Business among entrepreneurs and business owners in India. This is primarily because it offers a number of advantages over traditional forms of partnership businesses. In this blog, we will discuss in detail the concept of Limited Liability Partnerships, and the features that are responsible for their distinct popularity.
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The concept of a Limited Liability Partnership was first introduced in India through the LLP Act of 2008, as an incorporated form of partnership business, with an added advantage of restricted liability for the owners. Prior to this, partnership businesses could only be established as a Partnership Firm, which is one of the oldest forms of business structures in India. All the flaws of this archaic organizational structure like optional registration and unrestricted liability for owners, were overcome by the LLP. Hence, combining the best features of a Limited Company and a Partnership Firm, the LLP was incredibly quick in gaining popularity in the Indian Startup ecosystem.

Legal Definition of a Limited Liability Partnership

Section 3 of the LLP Act, defines a Limited Liability Partnership as a “body corporate incorporated under the act” and as a result of such incorporation, “is a legal entity separate from its owners”. It goes on to state that “A Limited Liability Partnership shall have perpetual succession”, and that that “any change in the partners shall not affect the existence, rights, or liabilities of the Limited Liability Partnership”. We shall decipher each of these statements one by one.

Separate Legal Entity

A business acquires a distinct legal identity only after it gets incorporated or registered. This means that unincorporated or unregistered business entities cannot acquire a legal identity of their own and thus operate with the identity of their owners, the best examples being sole proprietorships or unregistered partnership firms. However, as far as limited liability partnerships are concerned, incorporating them is mandatory under the LLP Act. So, as an incorporated entity, an LLP acquires a distinct legal identity, and operates with its own name.
There are several advantages that incorporated entities have over unincorporated entities, a few of which include:
  • An incorporated entity can sell, purchase and acquire property in its own name.
  • An incorporated entity can sue third parties in the event of a conflict.
  • An incorporated entity has the right to enter into contract with third parties under the Contracts Act. 
  • An incorporated entity is more credible and reliable for credit and investment, compared to unincorporated entities  As most of its records are recorded in publicly accessible government databases.
  • An unregistered or unincorporated partnership cannot recover more than Rs.100 in the event of debt recovery from third parties.

Perpetual Succession

Succession or inheritance is a concept that determines the continuation of a business entity after the permanent departure of the owner, due to death, retirement, resignation, or removal. Incorporated entities, including LLP, can usually be continued beyond the lives of its partners, meaning that the existence of the LLP will not be affected by the death or departure of any of its partners. Therefore, an LLP can be indefinitely or perpetually succeeded, and can only cease to exist if it is struck-off or wound up voluntarily or otherwise.

Rights and Liabilities of Partners

The constitution of an LLP is based on the terms and conditions mutually agreed by the partners and documented in the LLP Agreement. These terms and conditions are mostly related to the rights and responsibilities of the partners. The agreement is signed by all the partners in the presence of a public notary. The LLP Act states that the rights and responsibilities of the other partners shall remain unaffected by the departure of any one partner, for reasons including, death, retirement, or expulsion.

Features of a Limited Liability Partnership

The understanding of an LLP is incomplete unless you’ve grasped all its basic features. These include the minimum number of partners it must have, its maximum limit, its duration of existence, and the manner in which it is owned or managed. You can refer to the table below to learn all about the basic features of a Limited Liability Partnership.
S.No Parameters Main Features of a Limited Liability Partnership
Number of Partners
To start an LLP, a minimum of 2 partners are required, with no maximum limit
Number of Designated Partners
An LLP must have a minimum of 2 designated partners, with a maximum limit of LLP
Need for incorporation
Incorporating an LLP is mandatory under the LLP Act, 2008
Liability of Partners
Liability is shared among partners in the ratio mentioned in the LLP Agreement
Constitution Document
LLP Agreement signed by all the partners in the presence of a public notary
Internal Management
Flexible: based on the rules mentioned in the LLP Agreement
The LLP Agreement ceases to exist with the permanent departure of a partner


As we conclude this blog, we hope that you now have clarity on the concept of a Limited Liability Partnership in its truest sense. If you still have any questions, you can contact our startup advisors without any hesitation, and they will resolve all your doubts and queries in no time. We also provide services of incorporating Limited Liability Partnerships in India, and you can avail our services, if need be, by subscribing to our wholesome and reasonably priced packages.

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