LLP in India : What is LLP? How to Form an LLP in India

What is an LLP in India

An LLP in India or Limited Liability Partnership is a legal concept carved out of the mixture of a partnership and a company, representing a hybrid of the features of both of them.

As a form of business organization, an LLP in India offers to the businessman two benefits. One, he has the advantage of limited liability of a company.

The implication is that his liability is similar to that of a shareholder of a company.

Therefore, he is liable only up to the extent of his investment in the LLP and he cannot be held personally liable for the debts of the LLP.

Two, he has the advantage of controlling the organization and internal management of his firm, in conjunction with other partners according to a mutual agreement among the partners, as is done in a partnership firm.

This agreement is called the ‘limited liability partnership agreement’.

The LLP in India is a legal entity that is separate from its partners and claims will lie against the LLP to the extent of its assets, not its partners.

LLPs in India is governed by the Limited Liability Partnership Act of 2008.

llp LLP in India : What is LLP? How to Form an LLP in India

LLP in India: Why form an LLP?

If you are thinking of forming an LLP in India, there are definitely some advantages of this corporate structure that you could consider for your own business:

1.   The process of incorporation of an LLP in India is fairly simple and inexpensive.

2.  Since the LLP is a separate entity from its partners, it has perpetual succession. This means that unlike a general partnership which terminates if and when a partner changes, the LLP continues to exist until it is wound up according to the provisions of the LLP Act.

3. The most advantageous aspect of LLP in India is the lower rate of taxation compared to that of a company. Since LLPs are not subject to the Dividend Distribution Tax, no taxes have to be paid with respect to distributing the profits of the LLP to its partners.

4.  The books and accounts of an LLP in India do not have to be audited unless the investment exceeds 25 lacs or the annual turnover is in excess of 40 lacs. If you are a small businessman, this could save you some money.

5. You will not be acting as the agent of the other partners, as is the case in a general partnership. You will not be liable for the individual act of the other partners. This reduces the legal risks for you.

Here is the official website.

LLP in India: The Final Word

An LLP could prove to be a sound business vehicle for your business as it gives you the best of both worlds: the company structure as well as the partnership structure.

The business environment in India is becoming increasingly favorable to the formation of LLPs and considering that LLPs are widely accepted globally, it certainly could prove to be a promising option for your business.

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