The Limited Liability Partnership in India was introduced by the Limited Liability Partnership Act of 2008. It was organized for a number of reasons which include to create a flexible environment for small enterprises and to uplift the service sector so that the business synergies can be brought together easily. Out of all the the most prominent reason is to provide a simple business organization that is less complicated and the owners should have the right of limited liability. There are a number of benefits one can get through Limited Liability Partnership. Hence it is reasonable for one to convert the present partnership firm into the Limited Liability Partnership which will give them certain benefits. The benefits or the reasons for conversion are stated below-
Limited Liability for Partners
The Private Limited Company is preferred to by most partners because of one great reason. This is that in a partnership firm it is seen that the partners are individually and personally responsible and liable to the creditors. Therefore many of them hesitate to form a PARTNERSHIP Firm. In the case of Private Limited Liability, it is a completely different thing. The partners in the limited liability are reasonably liable for the acts only to which they have contributed for are directly connected to, rather than being personally liable to their creditors. This stands to be a major reason for the existing partnership firm to be converted in Limited Liability Partnership.
In the case of a partnership firm, the partnership is automatically dissolved if any of the partners or all partners die due to any accident or due to some reason. The case is different in the case of a Limited Liability Partnership. There is a situation of perpetual existence present here where a separate juristic person is present. The existence of this person is not decided or depended on his partners. In a Limited Liability Partners, all the partners keep of changing from time to time. But this will definitely not have an effect of the LLP’s task or continuity. If one want to ensure the continuation of his/her business firm irrespective of the partners being present or not LLP is best for them.
Partners are not Limited
The minimum number of Partners in an LLP is taken to be two. However, the maximum number of partners in a Limited Liability Partnership can be 10 when it is concerned will banking business and it may exceed to 20 in cases of all other types of business. it should be noted that the maximum number of partners who can join the LLP is not limited or fixed. However, at least two members should be present. In case if two members are not present the partner who remains continues the firm who now becomes personally liable.
Better Access to Credit
The Limited Liability Partnership is known to be an independent corporate body that have a clear understanding of their assets and what they are liable to. It is seen that because of this reason the banks and investors easily provide bank loans without any hesitation to the Limited Liability Partnership firm. It is also seen that the Limited Liability Partnership have a better Governance system and their management capacity is also high. This is because of the compulsory audits they are required to fulfill. This is why they are always preferred by all the banks and investors.
Potential for growth
The business environment at present reflects a number of strategies to promote the business. There stands to be a whole lot of mergers, amalgamation which helps to unfold the various business synergies. Such mergers and amalgamation are only possible in case of a Limited Liability Partnership and not a Partnership firm. Therefore most people prefer to convert into LLP from their existing partnership firm