What is limited partnership? Explain its merits and demerits.

Limited Liability Partnership (LLP) — Limited partnership is now allowed in India under the Limited Liability Partnership Act, 2008. LLP is a hybrid form of business organisation combining features of both partnership firm and joint stock company.

(a) Merits of LLP:

1. Separate Legal Entity — An LLP is a separate legal entity independent of the partners. It is capable of owning and holding property in its own name.

2. Stability — It is much more stable than a general partnership because it is not dissolved by retirement, insolvency, death, etc. of a partner. It enjoys perpetual existence.

3. Limited Liability — The liability of partners in LLP is limited; they have not to take unlimited risk.

4. Huge Funds — As there is no limit on the number of partners, an LLP can raise huge funds for expansion and growth of business.

(b) Demerits of LLP:

1. Registration Required — It has to be registered under the Act. It has to spend time and money in the documents and formalities of incorporation.

2. Less Secrecy — There is less secrecy of business affairs as it has to fulfil legal requirements.

3. Reduced Credit Standing — Credit standing of an LLP is reduced due to the limited liability of partners.