LIMITED LIABILITY PARTNERSHIP (LLP)
LIMITED LIABILITY PARTNERSHIP (LLP)
Limited Liability Partnership (LLP) is the most convenient mode of business coupled with the features of partnership form and limited company but it is free from the stringent procedure of registration of limited companies. Formation of LLP requires little online compliance and you can set your business in less time and at low cost.
Unlike in general partnership, no partner is liable on account of the independent or un-authorized actions of other partners and accordingly individual partners are protected from joint liability created by another partner’s wrongful actions or misconduct.
Following reasons can help you decide, why you should go for an LLP:
- Renowned form of business: Though the concept of Limited Liability Partnership has been recently introduced in India but it is very known concept in other countries of the world especially in service sector.
- 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. Moreover, in terms of cost the minimum fees of incorporation is as low as Rs 800 and maximum is Rs 5600.
- Body Corporate: Just like a Company, LLP is also body corporate, which means it has its own existence as compared to partnership. LLP and its Partners are distinct entity in the eyes of law. LLP will know by its own name and not the name of its partners.
- Limited Liability: A LLP exists as a separate legal entity from your personal life. Both LLP and person, who own it, are separate entities and both functions separately. Liability for repayment of debts and lawsuits incurred by the LLP lies on it and not the owner. Any business with potential for lawsuits should consider incorporation; it will offer an added layer of protection.
- Perpetual Succession: An incorporated LLP has perpetual succession. Notwithstanding any changes in the partners of the LLP, the LLP will be a same entity with the same privileges, immunities, estates and possessions. The LLP shall continue to exist till its wound up in accordance with the provisions of the relevant law.
- Flexible to Manage: LLP Act 2008 gives LLP the at most freedom to manage its own affairs. Partner can decide the way they want to run and manage the LLP, in form of LLP Agreement. The LLP Act does not regulated the LLP to large extent rather than allows partners the liberty to manage it as per their will and fancies..
- Easy Transferable Ownership: It is easy to become a Partner or leave the LLP or otherwise it is easier to transfer the ownership in accordance with the terms of the LLP Agreement.
- Separate Property: A LLP as legal entity is capable of owning its funds and other properties. The LLP is the real person in which all the property is vested and by which it is controlled, managed and disposed off. The property of LLP is not the property of its partners. Therefore partners cannot make any claim on the property in case of any dispute among themselves.
- Taxation: Another main benefit of incorporation is the taxation of a LLP. LLP are taxed at a lower rate as compared to Company. Moreover, LLP are also not subject to Dividend Distribution Tax as compared to company, so there will not be any tax while you distribute profit to your partners.
- Raising Money: Financing a small business like sole proprietorship or partnership can be difficult at times. A LLP being a regulated entity like company can attract finance from PE Investors, financial institutions etc.
- Capacity to sue: As a juristic legal person, a LLP can sue in its name and be sued by others. The partners are not liable to be sued for dues against the LLP.
- No Mandatory 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.
- Partners are not agent of other Partners: In LLP, Partners unlike partnership are not agents of the partners and therefore they are not liable for the individual act of other partners in LLP, which protects the interest of individual partners.
- Compliances: As compared to a private company, the number of compliances is on lesser side in case of LLP.
PROCEDURE FOR REGISTRATION:
The entire process of registration is a 4 – way step;
Step 1 - All those individuals who are intending to become designated partners must obtain Designated Partner/Director Identification Number [DIN] from the Ministry of Corporate Affairs.
Step 2 - An application of name availability should be filed in form-1.“LLP” should be written at the end of the name.
Step 3 - After getting the name approval, Form 2 has to be filed along with the registered Office Address proof.
Step 4 - LLP Agreement is to be drafted in line with the LLP Act. It is to be filed within 30 days from the date of registration along with Form 3.
Digital Signature of any partner must be attached with all the forms. After successful verification, registrar will register all the documents and will issue the Certificate of Incorporation.
PARTNERS DOCUMENTS REQUIRED:
2. Copy of PAN.*
3. Copy of Address Proof (Adhaar / Passport / Driving License/ Election ID)*.
* PAN & Address Proof shall be attested by a Gazetted Officer/ Bank Manager / Post Master. Please note, the attesting officer shall mention his name, phone number and should affix his office seal