Suicide of Businessmen: Limited liability could save some Indian lives

Source: The post is based on the article “Limited liability could save some Indian lives” published in the Livemint on 1^st September 2022.

Syllabus: GS 3 – Indian Economy and issues relating to planning, mobilization, of resources, growth, development and employment.

Relevance: About the suicide of Businessmen and the role of Limited Liability Partnerships(LLPs).

News: According to the National Crime Records Bureau (NCRB), during the two pandemic years of 2020 and 2021 more businessmen took their own lives than cultivators. This defies pre-covid trends.

What are the key findings of NCRB data on the suicide of Businessmen?

Daily wage-earners committed more suicides: The category of daily wage-earners logged the biggest toll with over 42,000 such deaths in 2021. This is a little above a quarter of the year’s total. The report highlighted business distress caused by the covid crisis as a plausible factor.

Business folks vs farmers: By last year’s count, more than 12,000 people in business died by suicide. On the other hand above 10,000 individuals engaged in agriculture lost their lives during the same period.

Subcategory of Businessmen: According to the NCRB database, suicide cases among people who were in business included 4,500+ vendors, 3,600+ tradesfolk and 3,800+ persons doing something else.

States of Businessmen committed suicides: Karnataka, Maharashtra, Madhya Pradesh, Tamil Nadu and Telangana accounted for half of them.

What are Limited Liability Partnerships(LLPs)?

India passed its Limited Liability Partnership Act. This created an LLP format, letting people join hands to set up a business entity governed by far fewer compliance rules than a regular company, but with the personal assets of partners shielded by the law from creditors.

How Limited Liability Partnership can reduce the suicide of Businessmen?

a) It limits the dues of a business to the money wilfully invested in it, b) In LLPs the owners would get a share of profits but have nothing at stake beyond the value of their shares.

What should be done to improve the effectiveness of LLPs?

In the informal sector, defaulting debtors can face severe consequences. But the LLP Act has witnessed only scant adoption. A special campaign to promote LLP enterprise and/or formalization of the informal economy has to take place.