Evolving Business Structures: Understanding LLPs and the Bombay High Court’s Validation of Experience

Introduction

Over the past years, Limited Liability Partnerships (LLPs) have become the most common structure for many Indian professionals, startups, and family-run enterprises. LLPs offer the best of the flexibility of a traditional partnership, and the safety net of limited liability. But while the law around LLPs has been fairly clear, a few grey areas have persisted—especially when it comes to questions like whether a partner’s earlier business experience counts after the business becomes an LLP. Recently, a judgment from the Bombay High Court has helped clear the air on that front.

Understanding LLP

A Limited Liability Partnership (LLP) is a blend of a partnership and a company format. It is registered under the LLP Act, 2008 and is treated as a separate legal entity from its owners. As such, the LLP may hold property, enter into contracts, sue or be sued in its own name. In such an arrangement, partners cannot be held personally liable for the firm’s debts barring cases of fraud or wrongdoing.

In simple terms, an LLP offers –

• Limited liability – Personal assets of partners are protected.
• Flexible structure – Partners can decide how they want to run the firm.
• Lower compliance burden – Compared to private limited companies, LLPs have fewer filing requirements.
• Continuity – The firm continues even if one of the partners exits.

Who Should Consider Starting an LLP?

LLPs are perfect for:

• Professionals including lawyers, accountants, architects and business consultants who wish to collaborate without risk to personal assets incurred through joint liability exposure.
• Small businesses and family enterprises wishing to establish a formalized business structure without intricate legal frameworks.

A Common Doubt: What Happens to Experience After You Switch to an LLP?

Until recently, there wasn’t a clear answer. Some government departments or authorities would reject bids simply because there was no formal document transferring the business experience from the proprietorship to the LLP. And in the process, entrepreneurs lost years of goodwill and credibility—just because of paperwork.

A Recent High Court Ruling Offers Clarity

In the case of Nandkumar Infrastructure LLP v. Superintendent Engineer & Ors., the Court dealt with this exact issue. The LLP had applied for a government contract, but their bid was rejected because they hadn’t submitted a notarized business transfer agreement (BTA) showing that the partner’s previous sole proprietorship experience had been passed to the LLP. The Court didn’t agree with this rejection. The judges made it clear that if a proprietor becomes a partner in the LLP, and continues the same business, that past experience can absolutely be considered the experience of the LLP—even without a notarized BTA, especially when the tender itself doesn’t require one. This is a huge relief for businesses that evolve over time. It means that your work history doesn’t get erased just because your business got a new name or structure.

Conclusion

For any entrepreneur or professional thinking about restructuring their business, the Limited Liability Partnership remains one of the most practical choices today. This avoids the bureaucracy that comes with a full company structure and provides legal protection, flexibility, and credibility. Now that courts such as the Bombay High Court are recognizing business continuity over technical formalities, LLPs have become an even safer and smarter option. One does not need to start from square one when switching to an LLP after years of growing a business they plan to scale up.