Nature of Ownership

• An LLP does not have a share capital structure like a company
  
• Ownership in an LLP is based on capital contribution and the LLP Agreement terms
  
• There are no shares, shareholders, or equity instruments in an LLP
  
• Partners are recognized through partnership roles, not shareholding
  
• The profit-sharing ratio is defined in the agreement, not by shareholding percentage
  

Legal Provisions

• The Limited Liability Partnership Act, 2008, does not provide for the issuance of shares
  
• LLPs are structured under contractual ownership, not company law governance
  
• The Act allows partners to agree on their ownership and rights contractually
  
• Any attempt to create shares or equity-like instruments is legally invalid under the Act
  
• LLPs are regulated separately from companies under the Companies Act, 2013
  

Fundraising Restrictions

• LLPs cannot raise funds from the public or offer securities in any form
  
• They cannot list on stock exchanges or invite public investments
  
• Capital infusion must be done by existing or newly admitted partners
  
• All investments must be made through partner contributions, not share issuance
  
• Venture capital and angel investors generally prefer companies due to these restrictions
  

Alternative Investment Methods

• LLPs may raise funds through partner loans or capital contributions
  
• They can admit new partners with agreed contributions and rights
  
• Private contracts or convertible instruments must comply with applicable financial laws
  
• However, these arrangements do not create shares or equity ownership
  
• External fundraising through equity requires conversion to a private limited company
  

Suitability and Structure

• LLPs are suitable for closely held businesses and professional firms
  
• They offer flexibility in profit sharing and partner roles without the need for share capital
  
• The model is efficient for low-compliance and privately financed operations
  
• For equity-based growth and share issuance, a company structure is more appropriate
  
• Entrepreneurs must choose between LLP and a company based on funding and growth goals