Limited Liability Partnership

LLP refers to Limited Liability Partnership which was introduced in India by way of the Limited Liability Partnership Act, 2008. The basic premise behind the introduction of Limited Liability Partnership (LLP) is to provide a form of business entity that is simple to maintain while providing limited liability to the owners. The main advantage of a Limited Liability Partnership over a traditional partnership firm is that in a LLP, one partner is not responsible or liable for another partner’s misconduct or negligence.

LLP is one of the easiest form of business to incorporate and manage in India. With an easy incorporation process and simple compliance formalities, LLP is preferred by Professionals, Micro and Small businesses that are family owned or closely-held. Since, LLPs are not capable of issuing equity shares, LLP should be used for any business that has plans for raising equity funds during its lifecycle.

Choose LLP Registration because:-

Double advantages- Forms Company and a Partnership

1. No partner will be liable for other partner’s misconduct.

2. Incorporation is cheaper compared to a private limited company.

3. Limits the liabilities of its partners.

4. Less Government Intervention.

5. Easy to dissolve or wind-up.

Advantages of Private Limited Formation

The most significant advantage is LLP registration is India is Limited Liability; it means the status of being legally liable only to a limited amount for debts of an LLP. As compared with partnership and proprietorship firms, in LLP the liability of members is limited. The personal assets of the owners are safe if the company goes bankrupt.

Limited Liability - Businesses often need to borrow money. In a General Partnership, partners are personally liable for all this debt. So if it cannot be repaid by the business, the partners would have to sell their personal possessions to do so. In an LLP, only the amount invested in starting the business would be lost; all personal property would be safe.

Reduced Compliance - An LLP only requires audited annual returns to be filed if it has a turnover of greater than Rs. 40 lakh or capital contribution of over Rs. 25 lakh. It also needs to communicate fewer business transactions and structural changes than a private limited company.

Separate Legal Entity - PA LLP is a legal entity and a juristic person established under the Act. Therefore, a LLP has wide legal capacity and can own property and also incur debts. However, the Partners of a LLP have no liability to the creditors of a LLP for the debts of the LLP.

No limit on owners of business - An LLP requires a minimum 2 partners while there is no limit on the maximum number of partners; this is in contrast to a private limited company wherein there is a restriction of not having more than 200 members.

Owning Property - A LLP being an artificial judicial person, can acquire, own, enjoy and sell, property in its name. No Partner can make any claim upon the property of the LLP – so long as the LLP is a going concern.

Taxation Aspect on LLP - For income tax purpose, LLP is treated on a par with partnership firms. Thus, LLP is liable for payment of income tax and share of its partners in LLP is not liable to tax. Thus no dividend distribution tax is payable. Provision of ‘deemed dividend’ under income tax law, is not applicable to LLP. Section 40(b): Interest to partners, any payment of salary, bonus, commission or remuneration allowed as deduction.

Dividend Distribution Tax (DDT) not applicable - In the case of a company, if the owners to withdraw profits from company, an additional tax liability in the form of DDT @ 15% (plus surcharge & education cess) is payable by company. However, no such tax is payable in the case of LLP and profits of a LLP can be easily withdrawn by the partners.

Lower Registration Cost - The cost of registering LLP is low as compared to cost of incorporating a private limited or a public limited company. An illustration can show the approximate cost involved in formation of private limited company and an LLP.

Documents Required

Documents required for LLP registration in India

1. Pan Card – PAN Card of shareholders and Directors. Foreign nationals must provide a valid passport.

2. Registered office Proof – Latest Electricity Bill/Telephone Bill/Water/Gas Bill of the registered office address.

3. Identity Proof – Aadhar card/Voter ID/Passport/Driving License of Shareholders and Directors.

4. NOC from Owner – No Objection Certificate to be obtained from the owner(s) of registered office.

5. Address Proof – Latest Telephone Bill/Electricity Bill/Bank Statement /Gas/Water Bill of Shareholders and Directors.

6. Rent Agreement – If Property is taken on Rent, then rental agreement required.

7. Photograph – Latest Passport size Color photograph of Shareholders and Directors.