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April 2024

Limited Liability Partnerships — Relevant Auditing and Accounting Considerations

By Ridhima Dubey,Chartered Accountant
Reading Time 12 mins

A Limited Liability Partnership (LLP) is a hybrid entity that combines features of a corporation and allows the flexibility of organizing its internal structure as a partnership based on a mutually arrived agreement. The agreement is not required to follow the strict form that applies to a company.

Talking about the key characteristics of an LLP, an entity structured as an LLP will enjoy a separate legal identity, limited liability for the partners, and perpetual succession. An LLP enjoys management and organisational flexibility regarding economic rights, which are freely transferable, and non-economic rights (management participation) which are non-transferable.

The contribution to LLP’s capital can be in cash or in kind. Receipt of consideration in ‘kind’ will entail determining its valuation to be able to determine the proportionate entitlement of the partners.

As stated above, the LLP provides enough flexibility to partners to enter into an LLP agreement, which shall govern the rights and duties of the partners. The LLP Agreement and any changes made therein shall be filed with the Registrar of LLPs. In the absence of agreement as to any

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