Limited Liability Partnership Act: Offences and penalties

Last Updated at: January 24, 2020
237
Limited Liability Partnership Act_ Offences and Penalties

Introduction:

More than 7,200 start-ups came up just in India in the year 2018. This big number is enough to justify the reason for growing LLP companies and their registrations. Not just, even before 2018, there was an increase of 55% in the LLP registrations. A major number of start-ups choose to go for Limited Liability Partnerships because of its benefits for the small scale businesses.

What exactly is LLP?

LLP stands for Limited Liability Partnership, which came into action under the Limited Liability Partnership Act, 2008. As per the terms, LLP is basically a partnership in which the partners who are involved have limited liabilities. The partners have the freedom and flexibility to organize themselves and their companies internally. One of its major benefits being that the Partners are not responsible for the actions and misconduct of each other.

Features and Benefits of LLP:

  • There is no concept of Minimum Capital Contribution.
  • Partners and LLP are two separate things and even have separate entities legally.
  • The benefits and features of LLP can be used by any start-up or organization without being restricted just to a particular class of professionals.
  • The LLP can easily be formed and has low costs.
  • The partners of the company are not responsible for each other’s actions.
  • As compared to other types of companies and businesses, LLPs have limited and fewer restrictions.

Disadvantages of LLP:

  • The only disadvantage is that money cannot be raised through LLPs.
  • Also, in the case of big and Pvt. Ltd. Companies, investors and bigger ventures partner with them, but it does not happen in the case of LLP.

Difference between Limited Liability Partnerships, Traditional Partnership Firm, and Company:

In the case of Limited Liability Partnership, there are no limits for the partners and the partners are also not responsible for misconducts of each other. The LLP has less number of regulations and restrictions.

While in the case of Traditional Partnership, the partners are completely responsible for each other’s acts. And, in the case of companies, there are a lot of rules and regulations which have to be followed completely by all the members. As such, the LLP is becoming a better option for the ones who are new in the field and business.

Penalties under the LLP Act:

As simple as the LLP act seems, there are still some cases where the Individuals and the organizations if found guilty of misusing and disregarding the rules of the LLP Act, will be liable for Punishments and fine.

Some of the Offences under the LLP Act can be:

  • Not keeping up to the rules and agreements made under this act.
  • Using the words ‘LLP’ or ‘Limited Liability Partnership’ in improper ways.
  • Punishable in the case of the Contravention of designated partners, Liabilities of Designated Partners and changing the names of the designated partners.

Any person found guilty of the above-mentioned or others will be punishable under Section 74 of General penalties made under the LLP Act, 2008.

Register Your LLP company Now

Under Section 74, General Penalties have been made and described for the LLP Act, not having any specific offences in general. The individual found guilty under this Act shall be liable to a fine of minimum Rs. 10,000 extending up to a sum of Five Lacs, depending on the offence and punishment. In case the defaults are continued, 50 rupees will be charged each day thereafter. As such, the Penalties so introduced under Section 74 of the LLP Act are monetary and nothing more.

If any false documents in the name of company or individuals are submitted, including return statement, incorporation of the company, knowingly the individual may be liable and guilty for the following punishments:

  • Imprisonment of up to two years.
  • A fine that may extend up to five lacs and a minimum of one lakh.

All of the offences will be compounded by the Registrar. All the applications of the offence will be compounded and submitted in Form-31.

As such, there are no major offences or punishments involved under the Limited Liability Partnership, which can easily be incorporated by following certain conditions and you are good to go for your business and get it growing.

Conclusion:

India ranks 3rd in the world in case of start-up growth, and more than 50% growth in the industry, it is the Golden Time for all the new businesses and companies to flourish and set their feet into the competition.

Also, with the introduction of the Limited Liability Partnership Act, 2008, it has become even easier for all the young minds to get started on what they’ve dreamed of, without worrying about filing taxes, audits and minimum amounts to get their business registered and running. All one needs is the will!

Limited Liability Partnership Act: Offences and penalties

237

Introduction:

More than 7,200 start-ups came up just in India in the year 2018. This big number is enough to justify the reason for growing LLP companies and their registrations. Not just, even before 2018, there was an increase of 55% in the LLP registrations. A major number of start-ups choose to go for Limited Liability Partnerships because of its benefits for the small scale businesses.

What exactly is LLP?

LLP stands for Limited Liability Partnership, which came into action under the Limited Liability Partnership Act, 2008. As per the terms, LLP is basically a partnership in which the partners who are involved have limited liabilities. The partners have the freedom and flexibility to organize themselves and their companies internally. One of its major benefits being that the Partners are not responsible for the actions and misconduct of each other.

Features and Benefits of LLP:

  • There is no concept of Minimum Capital Contribution.
  • Partners and LLP are two separate things and even have separate entities legally.
  • The benefits and features of LLP can be used by any start-up or organization without being restricted just to a particular class of professionals.
  • The LLP can easily be formed and has low costs.
  • The partners of the company are not responsible for each other’s actions.
  • As compared to other types of companies and businesses, LLPs have limited and fewer restrictions.

Disadvantages of LLP:

  • The only disadvantage is that money cannot be raised through LLPs.
  • Also, in the case of big and Pvt. Ltd. Companies, investors and bigger ventures partner with them, but it does not happen in the case of LLP.

Difference between Limited Liability Partnerships, Traditional Partnership Firm, and Company:

In the case of Limited Liability Partnership, there are no limits for the partners and the partners are also not responsible for misconducts of each other. The LLP has less number of regulations and restrictions.

While in the case of Traditional Partnership, the partners are completely responsible for each other’s acts. And, in the case of companies, there are a lot of rules and regulations which have to be followed completely by all the members. As such, the LLP is becoming a better option for the ones who are new in the field and business.

Penalties under the LLP Act:

As simple as the LLP act seems, there are still some cases where the Individuals and the organizations if found guilty of misusing and disregarding the rules of the LLP Act, will be liable for Punishments and fine.

Some of the Offences under the LLP Act can be:

  • Not keeping up to the rules and agreements made under this act.
  • Using the words ‘LLP’ or ‘Limited Liability Partnership’ in improper ways.
  • Punishable in the case of the Contravention of designated partners, Liabilities of Designated Partners and changing the names of the designated partners.

Any person found guilty of the above-mentioned or others will be punishable under Section 74 of General penalties made under the LLP Act, 2008.

Register Your LLP company Now

Under Section 74, General Penalties have been made and described for the LLP Act, not having any specific offences in general. The individual found guilty under this Act shall be liable to a fine of minimum Rs. 10,000 extending up to a sum of Five Lacs, depending on the offence and punishment. In case the defaults are continued, 50 rupees will be charged each day thereafter. As such, the Penalties so introduced under Section 74 of the LLP Act are monetary and nothing more.

If any false documents in the name of company or individuals are submitted, including return statement, incorporation of the company, knowingly the individual may be liable and guilty for the following punishments:

  • Imprisonment of up to two years.
  • A fine that may extend up to five lacs and a minimum of one lakh.

All of the offences will be compounded by the Registrar. All the applications of the offence will be compounded and submitted in Form-31.

As such, there are no major offences or punishments involved under the Limited Liability Partnership, which can easily be incorporated by following certain conditions and you are good to go for your business and get it growing.

Conclusion:

India ranks 3rd in the world in case of start-up growth, and more than 50% growth in the industry, it is the Golden Time for all the new businesses and companies to flourish and set their feet into the competition.

Also, with the introduction of the Limited Liability Partnership Act, 2008, it has become even easier for all the young minds to get started on what they’ve dreamed of, without worrying about filing taxes, audits and minimum amounts to get their business registered and running. All one needs is the will!

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