Partnership to Private Limited Company
Partnership firms are at a disadvantage when compared to the newly introduced Limited Liability Partnership (LLP) as they do not provide limited liability protection for the partners, separate legal entity status, ability to take on unlimited number of partners and ease of ownership transfer. The partners of the LLP will be jointly and severally liable for all liabilities and obligations incurred by the firm before the conversion. If any partner discharges a liability, the LLP will indemnify that partner. The introduction of LLPs through the Limited Liability Partnership Act, 2008 has made LLPs the premier choice for small and medium sized businesses. In reality, however, LLPs offer a major advantage in terms of limited liability, adding to the cause of the shift.