What is Limited Liability Partnership?
Limited Liability Partnership: Limited liability partnership or LLP is a partnership firm which is registered under LLP act 2008 with MCA It has been introduced in the year 2008 in India via Limited Liability Partnership Act, 2008.
It is a partnership where the partners don’t have unlimited liabilities which means that in case of an adverse situation in LLP or declares bankruptcy in all the partner will only lose the value of his investment and he is not liable to other outstanding liabilities like creditors etc., partner’s assets will not be seized or sold. earlier this benefit was only available for companies.
By protecting the partners in this way, many more people have been encouraged to invest in LLP.
BENEFITS OF FORMATION OF LIMITED LIABILITY PARTNERSHIP
The LLP is a mix combination of advantageous features of both partnership and company. LLP covers the benefits of both partnership and company and thereby makes a better form of organization.
- Minimum capital requirement
There is no limit for the requirement of capital by the partners in LLP formation it can be registered with any amount of capital that is decided by the partners in LLP agreement there is no limitation in the act.
- Cost of registration is less
The cost of registration is very less as compared to incorporating of private limited co, public limited co or one-person company as very nominal fees is to be paid for name approval and incorporation form.
- No compulsory audit
There is no need for compulsory audit the LLP is only liable to audit if the partner’s contribution exceeds rupees 25 lakhs or the annual turnover of the LLP exceeds Rs 40 lakhs.
- Lower compliances& fewer regulations as compare to companies
The compliances for LLPs are very less as compare to companies as LLP don’t have to conduct AGMs and there is no need to submit directors report, no need to hire a company secretory etc.
- One partner is not liable for another partner’s misconduct or negligence
As mentioned above in case of an adverse situation in LLP or declares bankruptcy in all the partner will only lose the value of his investment partner’s assets are safe.
- Better recognition and goodwill in market
Corporate clients, government agencies, and vendors prefer to deal with llp instead of partnership firm or proprietorship firms, etc due to the transparent system of the registrar of companies also it has good credibility & recognition in the market as it is a registered form of business.
- can convert other entities into LLP
Any registered partnership with fulfilling some conditions as all partners consent, all partners must be continued in llp upto date ITR must be filed, consent of all creditors etc.
can be converted into a limited liability partnership also any private limited /unlisted public company with fulfilling some conditions like no security interest in its assets all shareholders must become partner upto date ITR & roc returns must be filed, no open (unsatisfied) roc charges at least one balance sheet and annual return should have been field filed by the company after its incorporation.
Looking for LLP/Company Formation?
We Bashmakh & co. will help you in LLP company registration, we also provide you guidance in ROC compliances (submissions and filling of required forms with MCA), accounting, taxation and Audit services, and many more.
Advantages of Operating as a Limited Liability Partnership:
Limited Liability Protection: One of the key advantages of an LLP is that it offers limited liability protection to its partners. This means that the personal assets of partners are safeguarded, and their liability is limited to the extent of their investment in the LLP. The personal assets of partners are protected from the business debts and liabilities of the LLP.
Flexible Management Structure: LLPs provide flexibility in the management and decision-making processes. Partners have the freedom to define their roles and responsibilities, and the LLP agreement can be tailored to suit the specific needs of the partners. This allows for efficient decision-making and better operational control.
Pass-Through Taxation: LLPs enjoy pass-through taxation, where the profits and losses of the LLP are passed on to individual partners and taxed at their respective personal tax rates. This eliminates the double taxation that occurs in certain other business structures, such as corporations.
Easy Formation and Compliance: LLPs are relatively easy to form and have fewer compliance requirements compared to corporations. The registration process is simpler, and fewer regulatory formalities are involved. This reduces the administrative burden and costs associated with maintaining the LLP.
Credibility and Perception: Operating as an LLP can enhance the credibility and perception of a business. LLPs are recognized legal entities, and having the “LLP” designation in the business name can instill trust and confidence among clients, customers, and business partners.
Continuity of Existence: LLPs have perpetual succession, meaning that the LLP continues to exist even if one or more partners leave or new partners join. The death or retirement of a partner does not lead to the dissolution of the LLP. This ensures continuity and stability in the business operations.
Professional Service Firms: LLPs are particularly well-suited for professional service firms, such as law firms, accounting firms, and consulting agencies. They provide a suitable structure for professionals to collaborate and share resources while enjoying the benefits of limited liability protection.
Looking for LLP/Company Formation?
We Bashmakh & co. will help you in LLP company registration, we also provide you guidance in ROC compliances (submissions and filling of required forms with MCA), accounting, taxation and Audit services, and many more.