Section 2 of the Limited Liability Partnership Act, Chapter 30A, stipulates a Limited Liability Partnership (LLP) as one registered under the Act, whereas the Partnership Act No. 16 of 2012 defines a partnership as the relationship which exists between persons who carry on business in common with a view of making a profit.
Currently there are three forms of partnerships in Kenya, a general partnership, a limited partnership and a limited liability partnership.
A LLP is formed, section 17 of the Limited Liability Partnership Act by submitting a Statement of Particulars with the Registrar of Limited Liability Partnerships.
Under the LLP Act, that the Registrar of Companies is appointed to act as the Registrar for LLPs. Upon registration, a limited liability partnership becomes a body corporate with perpetual succession and acquires a separate legal entity personality from its partners and therefore any change in its partners does not affect the existence, rights or obligations of the limited liability partnership.
On the other hand, a general partnership is governed by the Partnership Act, Act No. 16 of 2012 while being registered under the Registration of Business Names Act.Upon registration, a general partnership does not become a body corporate.
The limited liability partnership, under section 7(2) of the LLP Act, is required to maintain and use a common seal that bears its name to be utilized to execute all documents that are required by law to be sealed by it.
Under section 22 of the Partnership Act, the liability of a partner in a general partnership is unlimited. Accordingly, a partner is personally liable for the whole amount of any obligation incurred by the partnership while he is a partner. Accordingly, their personal assets could be used to settle business debts if and when becomes necessary.
A limited partnership on the other hand has two types of partners known as general partners; and limited partners. The liability of general partners is unlimited. The liability of a limited partner is limited to the extent of the amount contributed by the partner to the partnership at the time of joining the partnership.
The liability of all partners in a LLP is limited. Therefore a partner is not personally liable, directly or indirectly, for the partnership’s obligations arising in a contract, tort or otherwise. In addition, a partner in a LLP is not personally liable for the wrongful act or omission of another partner of the LLP. The liabilities of a LLP are from the property of the LLP and from the personal assets of the partners.
The liability of partners of a LLP differs immensely from those of the general partnership and the limited partnership. However, the liability of a limited partner in a limited partnership is similar to that of a partner of a LLP. The difference between a LLP and a limited partnership is that the latter is required to have general partners so that the liability of all its partners is not limited like the LLP.
All partners in a general partnership have the entitlement to participate in the management of the partnership business.
In a limited partnership, all general partners can participate in the management of the business of the partnership. However, a limited partner is prohibited under section 58 (1) of the Partnership Act from taking part in the management of the business of the partnership .
On the other hand, a LLP is required to have a manager to manage the day-to-day activities of the business. A LLP is commonly said to be a quasi-partnership.