What is Limited Liability Partnership?
If you are starting a business along with two or more friends, you have many options for registering a business, such as Partnership, Private Limited, public limited and among that Limited Liability Partnership registration is an alternative corporate business entity which gives the benefits of limited liability of a company and the flexibility of a partnership. It was introduced in 2008 and the governing act is the Limited Liability Partnership Act, 2008.
Registration of limited liability partnership and Eligibility:
The incorporation of a Limited Liability Partnership firm requires two partners, two designated partners (the same partners can also be the designated partners), and an office space in Indian territory. No minimum share capital is required.
What are the steps involved in the Registration of limited liability partnership (LLP)?
Step 1: Name Approval
Step 2: Get the Digital Signature
Step 3: Obtain DPIN (Designated Partner Identification Number)
Step 4: Submission of Documents
Step 5: Incorporation of Limited Liability Partnership
Step 6: Submission of Limited Liability Partnership Agreement (30 days)
Advantages of Limited Liability Partnership Registration
No minimum capital contribution is required:
A major advantage of a Limited Liability Partnership can be formed without investing any minimum Paid Up capital, unlike a Private Limited Company, which requires a minimum of One Lakh share capital.
Limited liability protects the Personal assets of the shareholder from business liabilities because An LLP is a separate legal entity from the members.
As compared with a Partnership firm, Limited Liability Partnership has higher credibility and also it helps to create a belief among the clients, investors and partners.
Attract investment from Venture Capitalists
If you plan to grow your business by attracting funds from venture capitalists, you can register a Limited Liability Partnership because an LLP supports attracting fund from venture capitalists and angel investors.
Number of partners:
Incorporation of a Limited Liability Partnership with a minimum of two partners is mandatory, whereas there is no restriction on the maximum limit of partners like other entities.
We have already seen that a Limited Liability Partnership is a separate legal entity and therefore a change or retirement or death of partners will never affect that existence of the entity.
No Audit Required:
A Limited Liability Partnership is not required to conduct any statutory audit unless the annual turnover exceeds forty lakhs in a financial year.
As compared to Private Limited or Public Limited, the functioning of Limited Liability is easier. LLP’s operations and distribution of profits are based on a written agreement between the shareholders.
According to the Income Tax Act, 1961 of Section 40(b), the salary, bonus, commission, interest, compensation, or any other payments are allowed for deduction. Hence, partners are not liable to pay taxes for their revenue and shares.
Dividend distribution is not applicable
In case of a private limited company, if the shareholders withdraw profits from the company, additional tax liability in the form of DDT @ 15% (plus surcharge & education cess) is payable by the company. However, no such tax is payable in the case of a Limited Liability Partnership and the profits of a Limited Liability Partnership can be easily withdrawn by the partners.
With a Limited Liability Partnership, you can sue your partners or vendors along with the representation of the company in case of any dispute.
Board of Director Meetings:
Shareholders are not required to hold four mandatory board meetings once a year as required by the Companies Act. Partners can meet based on their convenience or need. Partners can specify the meeting details and schedule in the Limited Liability Partnership agreement.
Separate legal entity:
A Limited Liability Partnership is considered as a separate legal person and has certain rights to own property, purchase, rent, lease, bank accounts, hire employees, draft agreements, etc. and the partners are not responsible for the liability of the firm.
All other types of companies maintain a register or documents for filing ROC but in Limited Liability Partnership, there is no need to maintain any register or documents.
Easy to dissolve:
A Limited Liability Partnership registration can be easily dissolved with a mutual understanding of the partners by submitting the resolution to the registrar.
So, in this blog, we had seen the advantages of Limited Liability Partnership or LLP, to know more about business and legal registration, follow us