- A partnership firm cannot be a partner of another firm on the logic that the partnership firm does not have a distinct and separate identity as a legal person.
- Private Limited Company is a legal entity, like any natural person. So, it enjoys the advantage of having a separate legal identity apart from its members. It can hold assets & liabilities in its name, enter into a legal contract, sue and cannot be sued. Private Limited company can be a Partner in a firm and Limited Liability Partnership.
- On the same logic, LLP is a separate legal entity by itself. It has a corporate existence as per section 3 of the LLP Act. So, general view is that it can be a partner. Question to be asked here is, Whether Registration of an LLP create a corporate identity of the firm i.e., juristic person? Or, it only gives its partners immunity from being personally liable?
- LLP is a hybrid type of corporate entity which seeks to combine the advantages of a partnership firm and private limited company but also tries to avoid the disadvantages of both. In short, it tries to take the best of both the world. Limited Liability Partnership (LLP) is a combination of a Partnership Firm and a Private Limited Company in which the owners have a limited liability. It was introduced in India under the Limited Liability Partnership Act, 2008. An LLP do have a separate legal identity from its members and shareholders and involves lesser compliance requirements as compared to a company. So, in my view, it can be a partner in a firm.
- There is one contrary view because of section 25 & section 49 of the partnership Act.
Section 25 of the Partnership Act conveys that every partner is liable, jointly with all the other partners and also severally, for all acts of the firm done while he is a partner. Under section 49 of the Partnership Act, each partner is also personally liable to the debts of the firm. Hence, in my view the liability of any partner cannot be limited, as in the case of LLP if an LLP were to become a partner in a firm.
However, in my view, liability of LLP may be unlimited against the liability of partnership firm but the liability of partners in LLP will remain limited. This is what probably is the meaning of above section 25 & 49.
Naresh Jakhotia Answered question