Limited Liability Partnership (LLP) is a body corporate formed and registered under the Limited Liability Partnership Act, 2008, which combines the organisational flexibility of a partnership with the limited liability protection of a company. Under Indian law, it is defined in Section 2(1)(n) of the LLP Act, 2008, as a partnership formed and registered under the Act.
Legal definition
Section 2(1)(n) of the Limited Liability Partnership Act, 2008 provides:
"Limited liability partnership" means a partnership formed and registered under this Act.
The nature and character of an LLP is further elaborated in Section 3 of the Act:
(1) A limited liability partnership is a body corporate formed and incorporated under this Act and is a legal entity separate from that of its partners.
(2) A limited liability partnership shall have perpetual succession.
(3) Any change in the partners of a limited liability partnership shall not affect the existence, rights or liabilities of the limited liability partnership.
Section 6 specifies that every LLP shall have at least two partners and shall have at least two individuals as designated partners, of whom at least one shall be a resident of India.
The limited liability feature is codified in Section 27(3), which provides that an obligation of the LLP, whether arising in contract or otherwise, is solely the obligation of the LLP, and a partner is not personally liable, directly or indirectly, for such an obligation solely by reason of being a partner.
How courts have interpreted this term
Ambalal Sarabhai Enterprises Ltd. v. K.S. Infraspace LLP & Anr. (2020) 15 SCC 585
The Supreme Court considered the legal status and standing of an LLP in the context of the Commercial Courts Act, 2015. While the primary issue concerned the definition of "commercial dispute" relating to immovable property, the case recognised the LLP as a distinct legal entity capable of holding property, entering into contracts, and maintaining litigation in its own name. The Court treated the LLP entity at par with a company for purposes of commercial litigation.
Guided Missile Staff Cooperative Housing Building Society Ltd. v. Registrar of Cooperative Societies — In a broader context, Indian courts have consistently treated LLPs as bodies corporate with full legal capacity. The LLP structure has been recognised across regulatory frameworks, including tax legislation (the Income Tax Act treats LLPs as firms for tax purposes under Section 2(23) read with the Finance Act, 2009) and insolvency law (LLPs are eligible for the insolvency process under Part V of the Insolvency and Bankruptcy Code, 2016).
Types of limited liability partnership
While the LLP Act does not formally classify LLPs into sub-types, practitioners recognise these functional categories:
- Professional LLP: Formed by chartered accountants, company secretaries, advocates, or other professionals to carry on practice collectively while limiting individual liability for the acts of other partners.
- Business LLP: Used for trading, manufacturing, or service-based businesses, particularly by small and medium enterprises seeking limited liability without the compliance burden of a company.
- Foreign LLP (Section 2(1)(m)): A limited liability partnership formed, incorporated, or registered outside India that establishes a place of business within India, required to comply with Section 59 of the LLP Act.
Why this matters
The LLP was introduced in India in 2008 to fill a structural gap in Indian business law. Before its enactment, entrepreneurs had two primary choices: a partnership firm (offering operational flexibility but with unlimited personal liability) or a private limited company (offering limited liability but with substantial compliance requirements). The LLP bridges this gap by providing limited liability protection to partners while maintaining the internal governance flexibility of a partnership.
For professionals such as chartered accountants, company secretaries, and cost accountants, the LLP is particularly significant because their respective professional bodies have specifically permitted practice through the LLP structure. This means that a partner in a professional LLP is not personally liable for the negligence or malpractice of another partner — a substantial improvement over the traditional partnership where each partner bears unlimited joint and several liability.
From a compliance perspective, LLPs enjoy a lighter regulatory framework than private companies, with no board meetings or statutory audits required (unless turnover exceeds forty lakh rupees or contribution exceeds twenty-five lakh rupees). However, LLPs cannot raise equity capital from external investors or issue shares, making them unsuitable for businesses anticipating fundraising rounds. LLPs fall within the Insolvency and Bankruptcy Code, 2016 (Part V), enabling creditors to initiate insolvency proceedings.
Related terms
Broader concepts:
Related structures:
Related procedures:
Frequently asked questions
What is the minimum number of partners required to form an LLP in India?
An LLP requires a minimum of two partners under Section 6 of the LLP Act, 2008. There is no upper limit on the maximum number of partners. At least two individuals must be designated as designated partners, of whom at least one must be a resident of India (having stayed in India for at least 120 days in the preceding financial year).
Can an LLP be converted into a private limited company?
Yes. The Companies Act, 2013 read with the Companies (Authorised to Register) Rules, 2014 permits the conversion of an LLP into a private limited company. Conversely, Section 56 of the LLP Act allows a private limited company to convert into an LLP, subject to the conditions prescribed in the Third Schedule and Fourth Schedule of the Act.
Is an LLP taxed like a company or a partnership firm?
An LLP is taxed as a partnership firm under the Income Tax Act, 1961. It is subject to a flat income tax rate of 30 percent on its total income, plus applicable surcharge and cess. Partners' share of profit from the LLP is exempt from tax in the hands of the partners under Section 10(2A), similar to the treatment of partnership firms. Unlike companies, LLPs are not subject to dividend distribution tax.
What happens if the number of partners in an LLP falls below two?
If at any time the number of partners falls below two and the LLP carries on business for more than six months while the number is so reduced, the remaining partner shall be personally liable for obligations of the LLP incurred during that period, as provided under Section 6(2) of the LLP Act, 2008.
Can an LLP raise investment through equity shares?
No. An LLP cannot issue shares or equity instruments. Capital in an LLP is contributed by partners as "contribution" under Section 32, which can be in the form of tangible or intangible property or other benefit. For businesses seeking external equity investment through share issuance, a private limited company is the appropriate structure.
This entry is part of the Veritect Indian Legal Glossary, a comprehensive reference of Indian legal terminology grounded in statutory text and judicial interpretation.
Last updated: 2026-03-27. Veritect provides this content for informational purposes and does not constitute legal advice.