This blog is written by Mr. Agha M. Mudasssar Khan, Manager Accounting, Taxation and Corporate Services. Please read this technically explained Blog and provide us your useful comments.



A relatively new concept introduced by SECP in May 2018, namely Limited Liability Partnership (LLP) is a form of business having status of a legal entity separate from its partners. LLP combines the flexibility of a general partnership and the advantages of limited liability of a company at a low compliance cost. In other words, it is an alternative corporate business vehicle that provides the benefits of limited liability of a company, but allows its members the flexibility of organizing their internal management on the basis of a mutually arrived agreement, as is the case in a general/ conventional partnership firm.

In Pakistan, conventionally general partnership firms are regulated through Partnership Act 1932 and such firms are not considered as juristic person (legal personality) and partners of firm have unlimited liability to fulfil the obligations and liabilities of the firm. There is no compulsory requirement for registration of a general partnership in Pakistan rather it is optional for the members to keep it formal or informal.

Who can form an LLP?

Any two or more persons, associated for carrying on a lawful business with a view to profit, may form an LLP after registration with the Commission as per the Limited Liability Partnership Act, and the Limited Liability Partnership Regulations, 2018.  It is imperative to understand that, any existing partnership business or a Private Limited Company, can also get its status transferred to an LLP, subject to the minimum compliance requirement.

How it can be registered/ formed?

An LLP can get registered if a statement by every person who is to be a partner of the limited liability partnership is lodged with the Registrar along with the partnership agreement, containing name of the proposed LLP, general nature of the proposed business of the LLP, registered office of LLP, identification of all partners and Designated/Managing Partners partner.

Key Features about LLPs Structure, Nature and Liability of Partners

The LLP is a body corporate and a legal entity separate from its partners having perpetual succession.

Any two or more persons, associated for carrying on a lawful business with a view to profit, may by subscribing their names to an incorporation document and filing the same with the Registrar.

The mutual rights and duties of partners of an LLP are governed by an agreement between partners or between the LLP.

The LLP being a separate legal entity, will be liable to the full extent of its assets, with the liability of the partners being limited to their agreed contribution in the LLP which may be of tangible or intangible nature or both tangible and intangible in nature.

No partner in LLP would be liable on account of the independent or unauthorized actions of other partners or their misconduct. The liabilities of the LLP and partners who are found to have acted with intent to defraud creditors or for any fraudulent purpose shall be unlimited for all or any of the debts or other liabilities of the LLP.

Every LLP would have at least one partner as Designated/Managing partner, who shall be resident in Pakistan. Role of a designated partner shall be the same as that of a CEO/ Principal Officer in a company

As a body corporate, the Partnership Act, 1932 shall not be applicable to an LLP.

Core document of an LLP

Partnership deed or partnership agreement is a constitutive document of the LLP, which defines the existence of the entity and regulate the structure and control of the entity and its members. It predominantly details matters pertaining to the duties, liabilities, and mutual rights of the partners and is equivalent to the memorandum and articles of association of a limited company.

Annual Return and other Filing

Although an LLP is not required to submit any annual return to the Registrar, however any change in particulars of partners, place of business etc., shall be intimated to the registrar on prescribed form indicating the nature, cause and effect of such change, within seven days of change.

Only available mode of filing for an LLP is online.

Applicable Financial Reporting Framework, Tax obligations and Audit Requirement

An LLP is required to maintain books of accounts at its registered office, relating to its state of affairs for each year of its existence on accrual basis and according to double entry system of accounting. However as of now, there is no applicable financial reporting framework for the preparation and presentation of financial statements. Financial statements must be approved by the partners within four months of end of LLPs financial year.

For the purpose of taxation, LLP will be treated as a normal/ general partnership firm. Profit will be taxed in the hands of the LLP and not in the hands of the partners. Remuneration to partners will be taxed as “Income from Business & Profession”.

Each LLP is required to get its financial statements audited from any person who is a member of any professional accountancy body, i.e. ICAP/ ICMAP. Auditor shall conduct the audit and prepare his report in compliance with the requirements of International Standards on Auditing as adopted by the Institute of Chartered Accountants of Pakistan.

Winding up of an LLP

The winding up of an LLP may be either voluntary or by the Court. The Registrar of LLP shall have the power to strike off the name of the company from the register of LLPs.

Businesses Suitable for an LLP

LLP can be a suitable business platform for businesses belonging to manufacturing and services sectors. However, services Sector LLP can be a lifeline for the services sector and especially for professionals like charted accountants, company secretaries and advocates. In short, LLP can be formed to do any type of business such as manufacturing, trading, commercial or professional services with the object to earn profits. However, an LLP cannot be formed for charitable purpose because it is designed for mutual benefit and profit earning through commercial purpose, whereas charitable organizations are formed for welfare objects.

Key Comparison between an LLP and General Partnership

Particulars LLP General Partnership
Liability Partners have Limited Liability because they can bind LLP with their act but not to other partners. Liability of partners is limited up to their capital contribution however in case a partners acts with an intension to conduct fraud, they are personally liable. Partners have unlimited liability hence they remain liable for unlawful acts of other partners.
Legal Entity LLP is separate legal entity from its partners. Partnership is not a separate from its members. Partners are collectively referred as firm.
Perpetual succession LLP has perpetual succession irrespective of death or retirement of either of partner. Partnership can be dissolved on death or retirement.
Maximum Partners No limit on no. of partners. Maximum number of partners 20.
Property Property, assets, liabilities, rights, privileges and obligations can be owned by LLP as it enjoy separate legal existence apart from its partners. Property cannot be held in firm name.

Takeaways from this Blog

LLP is a business vehicle, introduced by SECP with the aim of providing regulated business platform by limiting the liability of partners of a firm, having the minimum of compliance/ regulatory requirement as compared to the Company form of business.

 Agha Mudassar Khan