Dissolution of partnership means partnership coming to an end while the firm still stands. Various reasons for the dissolution of partnership could be: Admission of a partner Death of a partner Retirement of a partner Dissolution of firm In the event of the above cases, the existing partnership is dRead more
Dissolution of partnership means partnership coming to an end while the firm still stands. Various reasons for the dissolution of partnership could be:
- Admission of a partner
- Death of a partner
- Retirement of a partner
- Dissolution of firm
In the event of the above cases, the existing partnership is dissolved and a new partnership is created with the new partners without affecting the firm.
A new partnership deed is created, in case there is a partnership deed agreed among partners and new profit-sharing ratios among the partners are decided, while the assets and liabilities of the firm remain the same.
Dissolution of a firm means the firm no longer exists. Various reasons for the dissolution of a partnership firm could be:
- Mutual decision of partners
- By the court of law
A partnership firm is dissolved by a court of law when there has been a non-compliance of law, the firm is engaged in illegal practices, or that the court’s opinion is that it is in the public interest for the firm to be dissolved.
The partnership is also dissolved with the dissolution of the firm but the converse need not be true.
When a firm is dissolved, there is a sequence that is followed to pay creditors and partners.
- First, outside creditors like banks, third party creditors are paid firstly with the cash available with the firm and then by selling the assets.
- Second, partners who have lent money in the form of a loan to the firm are paid.
- Lastly, if there is any surplus, partners are paid with the amount of their capital. In case of loss, partners are required to pay from their personal assets.
Dissolution of the firm can be done by the partners themselves and they could also appoint a third person to do so on the payment of fees, charges, the proportion of surplus, or any contract that has been agreed to.
To summarize, we can a draw a difference table as follows:
Dissolution of Partnership | Dissolution of Partnership Firm |
The partnership ends but the firm still stands. | A partnership firm no longer exists. |
A new partnership deed is created by the mutual agreement of partners. | A new partnership firm is created if the partners decide. |
Reasons:
· Admission · Retirement · Death |
Reasons:
· By court · Mutual decision of partners |
Definition A limited liability partnership (LLP)is a business vehicle like a partnership that features the partners ‘ liability is limited. Thus, it has elements of partnership and company. Another important feature of LLP is that each partner is not responsible or liable for another partner’s miscoRead more
Definition
A limited liability partnership (LLP)is a business vehicle like a partnership that features the partners ‘ liability is limited. Thus, it has elements of partnership and company.
Another important feature of LLP is that each partner is not responsible or liable for another partner’s misconduct or negligence.
LLP as constituted in INDIA:
The limited liability partnership act, 2008 came into effect on 31st march, 2009. LLP is different from a partnership as it operates like a partnership, but in an LLP each partner is protected from personal liability, except to the extent of his capital contribution in the LLP.
• LLP is subject to income tax like any other partnership firm.
• A partner is not liable for independent or unauthorized actions of other partners, thus allowing individual partners to be shielded from joint liability created by another partner‘s wrongful business decisions or misconduct.
• LLP is a body corporate and legal entity separate from its partners. It has perpetual succession like a limited liability company.
Indian partnership act 1932 is not applicable to LLPs and also the limit on the number of partners in an LLP is not applicable, unlike an ordinary partnership firm where the maximum number of partners cannot exceed the number specified under SEC 464 of Companies Act 2013, which at present is 50.
The LLP Act, 2008 specifies that a least one of the partners in the LLP is a citizen of India and an Indian national.
• The Registrar Of Companies ( ROC) is authorized to register and control LLPs.
Characteristics
• Separate legal entity :
Like a company, LLP also has a separate legal entity. Therefore partners and LLP are distinct from each other, like a company where the company has a legal entity separate from its shareholders.
• Minimum capital :
LLP is not required to maintain minimum capital. Thus partners in LLP decide how much capital will be contributed by each partner.
• The Minimum number of members :
An LLP can be established with at least two members who shall also be the designated partners and shall have Director Identification Number (DIN).
There is no limit on the maximum number of partners. Members other than designated partners are required to have DIN.
• Audit is not mandatory :
All companies, whether private or public, are required to get their accounts audited. However, an audit of LLP‘s books of accounts is not mandatory except :
• If the contribution of the LLP exceeds Rs 25 lakhs: or
• If the annual turnover of the LLP exceeds Rs 40 lakhs.