Limited Liability Partnership -The Hybrid Structure

Background

The concept of limited liability partnership was first originated in United States and it came to India through Limited Liability Partnership Act, 2008. Its history is quite interesting. During the financial crisis of United States in the late 1980s and early 1990s hundreds of saving and loan firms were declared insolvent. This resulted in collapse of many accountancy and legal firms who thereafter faced enormous legal claims instigated by the US government. These claims led to burden on those partners of such firms who were not even responsible for the failure and were held liable to repay millions of dollars in compensation. Then in 1991 a new concept of limited liability partnership (LLP) was introduced in the city of Texas which gained popularity in majority of United States and eventually resulted in passing of LLP legislation.