Limited Liability Partnership Case Study

Before commenting upon the nature of Limited Liability Partnerships (LLP) it is necessary to understand the system of partnership that it embodies. The LLP is provided for by the provisions of the Limited Liability Partnership Act, 2008. Under this act the LLP has been described as a “body corporate” and a artificial legal personality with perpetual succession.
Under the LLP the partners can manage the rights of duties though the means of an agreement that would be governed by the LLP act. The interested character of a limited liability partnership is that the LLP is only liable to the extent of its assets, to extent to which the personal assets of the partners are liable depends on the partners themselves, according to their agreement. None
A company under the companies act is an association of persons wherein at least two or seven members are needed to form company that can be either private or public. It is an incorporated association, which means it needs a certificate of incorporation from the Registrar. A company is an artificial legal person which means that a company can sue or be sued. If the doctrine of unveiling the corporate veil is ignored, the owners forming a company don’t share liability. Only the company is liable. Thus it is a distinct legal entity. It has perpetual succession and it not affected by the death of its members, this is in stark contrast with a partnership where a partnerships stands dissolved with the death of its members. There is diffused ownership in a company as many people can own a company at once, for example, in the case of a public company there is no upper limit to how many people can own the company. It also has a common steal and an object clause which specifically determines the kind of business activity the company will involve itself
A partnership can be made between at least two persons however there is a clear upper limit to the number of partners with a maximum of ten partners when the primary business activity is banking and twenty in other cases. Profit and loss is shared by the partners. This is the opposite of the company wherein the owners of the company only share profits up to the amount of liability they have taken in the company. There is unlimited liability on part of the partners . A Principle-agent relationship exists between the partners as all partners as said to act on behalf of all others. Any partner can represent the firm in any business dealing which is not the case in the case of a company. There is an advantage however, in the way that partnerships are far more flexible than companies, since the partners can easily make changed to their policies and business decisions according to their needs and deal with their problems with creativity. However this is not possible in the case of a company since they have stricter means of management. In addition to this taxation rates of partnerships are much lower than the rates applicable to companies. But the disadvantages to a partnership are substantial as well, in other areas. There is a lack of continuity has the partnership cannot outlast its partners. Owing to the principle-agent relationship there is always a chance that a partner may