In this blog post, Aishwarya Abhi, a fifth-year law student at Symbiosis Law School, Pune and pursuing a Diploma in Entrepreneurship Administration and Business Laws from NUJS, Kolkata, describes why do law firms reconstitute themselves as LLPs from partnerships.


In the Indian setting, organisations are ordinarily composed of sole proprietor concerns, partnership firms or companies (either open or privately restricted). These sorts of business associations have their individual preferences and inconveniences. For instance, a partnership firm gives adaptability in the interior association, right to take an interest in the administration, with no open divulgences, while on account of a company, the points of incorporated interest risk of shareholders being restricted, ceaseless progression and boundless individuals. In perspective of the global encounters of nations, for example, the UK and the US, and the proposals of the different corporate law changes boards of trustees, the willingly anticipated Limited Liability Partnership Bill, (LLP) 2008, has been passed by Parliament. LLP idea was acquainted all together to receive a corporate structure, which consolidates the hierarchical adaptability of a partnership firm combined with the benefit of constrained obligation for its partners.images-5

Associations like Law firms enrolled under the Partnership Act, 1932 used to be an extremely opted Business Entity type in India because of the effortlessness of enrolment and simplicity of support. With the presentation of the Limited Liability Partnership (LLP) in India through the Limited Liability Partnership Act, 2008, the unmistakable quality of Partnership’s has been supplanted by the LLPs.  LLPs are anything but difficult to enlist, they offer a variety of benefits to the promoters and is anything but difficult to keep up, making it perfect for some little and medium measured business that would savvy select to begin as a Proprietorship or a Private Limited Company.

Partnerships are enlisted under the Partnership Act, 1932. The accomplices of a Partnership enrolled under the Partnership Act, 1932 are by and by at risk for a boundless measure of Partnership liabilities. Thus, the association firm and the Partners are considered separate lawful elements, neither does the Partnership have ceaseless or perpetual existence. LLPs are enlisted under the Limited Liability Partnership Act, 2008. The Partners of an LLP are not by and by obligated for the liabilities of the Partnership, and the risk of a Partner is constrained to the measure of his/her capital commitment to the LLP. Accordingly, the LLP and the partners of an LLP are thought to be separate lawful elements and the LLP has a perpetual presence, until wound up by the Promoters.

Factors Contributing To Law Firms Shifting From A Partnership To An LLP

There are a variety of factors contributing towards the shift of paradigm of law firms towards an LLP from a partnership:-

  • LLP is also a body corporate, which means it has its existence as compared to the partnership. LLP and its Partners are a distinct entity in the eyes of the law. LLP will know by its name and not the name of its partners.
  • An LLP exists as a different entity from your life. Both LLP and individual, who own it, are separate elements and both capacities are independent. Obligations for reimbursement of obligations and claims brought about by the LLP lies on it and not the partners. Any business with potential for claims ought to consider incorporation as it will offer an additional layer of insurance. Hence, an LLP can sue and be sued in its name as it exists as a juristic legal person.images-4
  • Any Indian Citizen living in India can be a Partner in a Partnership Firm including minors. A Partnership Firm should have a base of 2 Partners and can just have a greatest of 20 Partners. Any Indian Citizen living in India can be a Partner in an LLP too. Minors are however not permitted to be part and parcel of an LLP. An LLP must have at least 2 Partners and is permitted to have boundless accomplices to its benefit.
  • The share in a Partnership can be transferred to someone else in the wake of getting the consent of the considerable number of Partners in a Partnership. The transferability of a Partnership is a difficult and lengthy process whereas the share of an LLP can be transferred to another person more easily. An LLP can be converted into a Private Limited Company or a Limited Company easily without any hassle.
  • Unlike partnerships, LLP’s have ceaseless progression. Despite any adjustments in the accomplices of the LLP, the LLP will be the same substance with the same benefits, immunities, bequests and belongings. The LLP should keep on existing till it’s wound up as per the arrangements of the pertinent law.images-1
  • LLP Act 2008 gives LLP the at most opportunity to deal with its particular undertakings. Partners can choose the way they need to run and deal with the LLP, in the type of LLP Agreement. The LLP Act does not control the LLP to a substantial degree as opposed to permitting partners the freedom to oversee it according to their will and fancies.
  • An LLP as the legal element is fit for owning its assets and different properties. The LLP is the genuine individual in which all the property is vested and by which it is controlled, overseen and arranged off. The property of LLP is not the property of its partners. Along these lines, they can’t make any case on the property if there should be an occurrence of any debate among them.
  • Another fundamental advantage of joining is the tax collection of an LLP. LLP are saddled at a lower rate when contrasted with other forms of businesses.

Hence, coupled with innumerous benefits over a partnership including those given above and much more, law firms are opting to be LLP’s with pride.

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