Limited Liability Partnership (LLP): Advantageous or not?

Last Updated at: January 24, 2020
227
llp Limited Liability Partnerships_ Advantageous Or Not_

Introduction

Between the year 2014-15, the LLP grew by a whopping 81%, along with over 85,000 registered LLPs by 2017. Not just this, around 2,043 of the private limited and other companies shifted to LLPs, making it around 9% of the total. This shift was made considering the benefits and hassle-free processes involved in their incorporation. There were over 90% fresh entities since the introduction of the act.

These digits and facts are enough to supplement the success rate of the Limited Liability Partnership which has an edge over the other companies.

Limited Liability Partnership

As the name suggests, Limited Liability Partnership is a good and well-mixed combination of the benefits Limited Liability along with the flexibility of being in a partnership. It acts as an alternative to corporate businesses and Private Limited Companies.

register for your LLP now

Benefits of Limited Liability Partnership

The Limited Liability Partnership has surely plenty of benefits to its name due to which the startups and other businesses are getting involved in it. This is due to its benefits that are as follows:

  1. Convenient:

    From the registration to incorporation and further carrying out its legal procedures, everything so involved is hassle-free and convenient, making the management easy.  It does not have any major legal obligations. 

  2. No minimum capital required:

    Planning to start a business or startup? But, worried about lots of investments that need to be done just for the legal processes. Well, LLP is the sure-shot solution for all of it. Under the LLP Act, the business can be registered and started without any requirements of the investments. Whereas, in the case of Private or other Public companies, the minimum investment has to be Rs.1,00,000 and can extend up to Rs.5,00,000.

  3. No restrictions on the number of partners in the business:

    There must be a minimum of 2 partners in an LLP, while there is no upper limit to it. While in the case of a private company, the upper limit is 200 members only.

  4. Cost of Registration:

    The cost of registration is very low or negligible compared to private and other companies.

  5. Audits:

    There is no compulsion on the filing and submission of monthly or yearly audits, compared to the private and other companies, irrespective of their shares or turnovers where the audits need to be filed regularly. 

  6. The LLPs need to file audits only in the case when the annual turnover is over 40 lacs or the total contributions are over 25 lacs.
  7. Dividend Distribution Tax (DDT):

    The DDT Tax is not applicable in the case of LLPs, while the other private companies have to pay a tax of 15% at the time of withdrawals along with other charges that are applicable according to the company and government policies.

  8. Liabilities of Partners:

    The partners involved in the company or business are not liable for each other’s misconduct or offences. The company and the partners are legally separate.

  9. Transferable Ownership:

    The partner can leave the company anytime and the ownership can be transferred easily according to the agreements of the LLP policy.

  10. Separate Properties:

    The LLP can own their properties separately without having the involvement of the company or any legal matters. They will solely own the property of the individual.

  11. Separate Entity:

    The LLP will exist as a separate part having no role in the individual’s personal life, neither legally nor professionally.

Every coin has two sides. And, so every act also has its own pros and cons.

Disadvantages of Limited Liability Partnership

Some of the disadvantages of LLP are as follows:

  • The penalty in case of non-compliance: In case the individual fails to file Form-8, the penalty applicable is quite high, being equal to Rs.100 per day.
  • Equity Investment: Due to the policy of all the members being the partners, a lot of investors and venture capitalists do not invest in LLPs.

As such, considering the pros and cons of the LLPs, one can choose which sort of company suits best for their business and can opt according to their requirements.

How to register an LLP Company online in India

You can operate your business under a Limited Liability Partnership in India online. Vakilsearch holds immense knowledge and expertise in LLP registration and help you in the following ways-

  1. Reserving LLP name – We help you pick the right name for your company/brand. 
  2. DSCs – We help you get the 2 DSC with 2 years validity.
  3. LLP Agreement – Finally, we draft, execute, and file the LLP Agreement (along with PAN & TAN) with utmost care.

 

Limited Liability Partnership (LLP): Advantageous or not?

227

Introduction

Between the year 2014-15, the LLP grew by a whopping 81%, along with over 85,000 registered LLPs by 2017. Not just this, around 2,043 of the private limited and other companies shifted to LLPs, making it around 9% of the total. This shift was made considering the benefits and hassle-free processes involved in their incorporation. There were over 90% fresh entities since the introduction of the act.

These digits and facts are enough to supplement the success rate of the Limited Liability Partnership which has an edge over the other companies.

Limited Liability Partnership

As the name suggests, Limited Liability Partnership is a good and well-mixed combination of the benefits Limited Liability along with the flexibility of being in a partnership. It acts as an alternative to corporate businesses and Private Limited Companies.

register for your LLP now

Benefits of Limited Liability Partnership

The Limited Liability Partnership has surely plenty of benefits to its name due to which the startups and other businesses are getting involved in it. This is due to its benefits that are as follows:

  1. Convenient:

    From the registration to incorporation and further carrying out its legal procedures, everything so involved is hassle-free and convenient, making the management easy.  It does not have any major legal obligations. 

  2. No minimum capital required:

    Planning to start a business or startup? But, worried about lots of investments that need to be done just for the legal processes. Well, LLP is the sure-shot solution for all of it. Under the LLP Act, the business can be registered and started without any requirements of the investments. Whereas, in the case of Private or other Public companies, the minimum investment has to be Rs.1,00,000 and can extend up to Rs.5,00,000.

  3. No restrictions on the number of partners in the business:

    There must be a minimum of 2 partners in an LLP, while there is no upper limit to it. While in the case of a private company, the upper limit is 200 members only.

  4. Cost of Registration:

    The cost of registration is very low or negligible compared to private and other companies.

  5. Audits:

    There is no compulsion on the filing and submission of monthly or yearly audits, compared to the private and other companies, irrespective of their shares or turnovers where the audits need to be filed regularly. 

  6. The LLPs need to file audits only in the case when the annual turnover is over 40 lacs or the total contributions are over 25 lacs.
  7. Dividend Distribution Tax (DDT):

    The DDT Tax is not applicable in the case of LLPs, while the other private companies have to pay a tax of 15% at the time of withdrawals along with other charges that are applicable according to the company and government policies.

  8. Liabilities of Partners:

    The partners involved in the company or business are not liable for each other’s misconduct or offences. The company and the partners are legally separate.

  9. Transferable Ownership:

    The partner can leave the company anytime and the ownership can be transferred easily according to the agreements of the LLP policy.

  10. Separate Properties:

    The LLP can own their properties separately without having the involvement of the company or any legal matters. They will solely own the property of the individual.

  11. Separate Entity:

    The LLP will exist as a separate part having no role in the individual’s personal life, neither legally nor professionally.

Every coin has two sides. And, so every act also has its own pros and cons.

Disadvantages of Limited Liability Partnership

Some of the disadvantages of LLP are as follows:

  • The penalty in case of non-compliance: In case the individual fails to file Form-8, the penalty applicable is quite high, being equal to Rs.100 per day.
  • Equity Investment: Due to the policy of all the members being the partners, a lot of investors and venture capitalists do not invest in LLPs.

As such, considering the pros and cons of the LLPs, one can choose which sort of company suits best for their business and can opt according to their requirements.

How to register an LLP Company online in India

You can operate your business under a Limited Liability Partnership in India online. Vakilsearch holds immense knowledge and expertise in LLP registration and help you in the following ways-

  1. Reserving LLP name – We help you pick the right name for your company/brand. 
  2. DSCs – We help you get the 2 DSC with 2 years validity.
  3. LLP Agreement – Finally, we draft, execute, and file the LLP Agreement (along with PAN & TAN) with utmost care.

 

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