Limited Liability Partnership

Let me go for a company. Umm…. but it’s difficult to keep up with its compliance requirements, cost is also high, and I don’t even need to give shares to anyone. Let me go for a partnership. Less compliance, less cost, liability..Oh no! I don’t want an unlimited liability. I should rather go for a Limited Liability Partnership, as Moneyम्जी once told me.

Limited Liability Partnerships, LLP is a unique and new form of business that combines the advantages of both ‘Company’ and ‘Partnership’ in a single business entity.

LLP is a superior form to partnership. The partnership is often discouraged to use because of its unlimited liability feature, i.e. your personal assets may also be held up in case all the dues are not cleared. Hence, it is very risky to use this form of business. So, to overcome this problem, a most important feature of limited liability of company is added to the partnership, which results in Limited Liability Partnership.

LLP is a separate entity, which can be formed in India by a minimum of two persons coming together with a motive of earning profit. Unlike a Private Limited Company, an LLP is easy to manage. It is subjected to minimal post registration compliances.

If a startup is not keen on raising funds and wants less stress on the compliances filing part, then they can opt for LLP type of partnership.

An LLP in India has following features:

  • Liability of Partners in LLP is limited to their capital contribution.
  • Less compliance is needed as compared to a Public Company.
  • Flexibility in business operation because partners can decide how they will individual contribute to the business operations.
  • Now, LLP can access to foreign equity funds under the automatic route. No RBI approval is required.
  • No tax is levied on a distribution of profits amongst the partners.
  • No restrictions on a maximum number of partners.

Limited Liability Partnerships, LLP is a unique and new form of business that combines the advantages of both ‘Company’ and ‘Partnership’ in a single business entity. This business form was introduced in India in the Year 2008 with the approval of the Limited Liability Partnership Act, 2008.

LLP is a superior form to partnership. The partnership is often discouraged to use because of its unlimited liability feature, i.e. your personal assets may also be held up in case all the dues are not cleared. Hence, it is very risky to use this form of business. So, to overcome this problem, a most important feature of limited liability of company is added to the partnership, which results in Limited Liability Partnership.

LLP is a separate entity, which can be formed in India by a minimum of two persons coming together with a motive of earning profit. Unlike a Private Limited Company, an LLP is easy to manage. It is subjected to minimal post registration compliances.

Some of the demerits of an LLP are, one doesn’t have the option of generating equity in an LLP which decreases the chances of raising funds from the investors in case of a startup, as investors are mostly expected to take up some percentage of the profit shares from the company.

Although, if a startup is not keen on raising funds and wants less stress on the compliances filing part, then they can opt for LLP type of partnership.

An LLP in India has following features:

Liability of Partners in LLP is limited to their capital contribution.
Less compliance is needed as compared to a Public Company.
Flexibility in business operation because partners can decide how they will individual contribute to the business operations.
Now, LLP can access to foreign equity funds under the automatic route. No RBI approval is required.
No tax is levied on a distribution of profits amongst the partners.
No restrictions on a maximum number of partners.

WHY LIMITED LIABILITY PARTNERSHIP?

 

EASY TO FORM

It is very easy to form LLP, as the process is very simple as compared to Companies and does not involve much formality. Compared to other forms of starting business, LLP has been found as the easiest form of incorporating a company and requires fewer hassles.

BODY CORPORATE

Just like a Company, LLP is also a body corporate, which means it has its own existence as compared to a partnership. LLP and its Partners are a distinct entity in the eyes of the law. An LLP is known by its own name and not by the name of its partners.

LIMITED LIABILITY

An LLP exists as a separate legal entity from its partners. Liability for repayment of debts and lawsuits incurred by the LLP lies on it and not on Partners. Forming an LLP is a good way to protect your personal assets from your company’s liabilities.

EASY TRANSFERABLE OWNERSHIP

It is easy to become a Partner or leave an LLP or otherwise it is easier to transfer the ownership in accordance with the terms of the LLP Agreement. It is relatively easy to transfer the ownership of an LLP to another person as compared to other business forms.

NO AUDIT REQUIREMENT

Under LLP, only in case of business, where the annual turnover/contribution exceeds Rs 40 Lacs /Rs 25 Lacs are required to get their account audited annually by a chartered accountant. This provides great relief to small businessmen.

COMPLIANCE

Compared to a Private Limited Company, A Limited Liability Partnership tends to have less compliance to follow.

CAPITAL REQUIREMENT

There is no minimum capital required to form an LLP.

TAX ADVANTAGES

There are some important advantages over the private limited company. For example, Dividend Distribution Tax and tax surcharge don’t apply. Loans to partners are also not taxable as income

GREATER FLEXIBILITY

Limited liability partnerships offer partners flexibility in business ownership. Partners have the authority to decide how they will individually contribute to business operations.

 

Time Period : 

For certificate of incorporation, if documents are complete, consider 14 working days, and for entire process including Form 3 & 4, just 7 more days.

MOVING STEP BY STEP

For Turnover < 10 Lakhs : Click here to initate process

For Turnover < 50 Lakhs : Click here to initate process

For Turnover < 1 Crore    : Click here to initate process