Starting a company is a rewarding, fulfilling, and exciting process that requires careful research and planning. One of the most crucial decisions you will take towards this goal is choosing the type of business entity you want to incorporate as.
Limited liability partnerships, better known as LLP, are growing in number since their introduction in 2008. However, experts believe they ought to be more popular than they are because of the benefits they provide. LLPs offer entrepreneurs all the advantages a private limited company does while excluding the downsides of partnership firms. It can accommodate unlimited partners and also offers limited liability and tax advantages. Individuals can register such business entities under the Ministry of Corporate Affairs, making them a legal and credible option.
Additionally, it requires fewer compliance measures when compared to private limited companies, making them cheaper and simpler to manage. Are you planning on incorporating a startup in India? If so, read on to learn more about why an LLP might be the best option for you!
Why Are Private Limited Companies So Popular?
Private limited companies have greater applicability as they offer a distinction between shareholders and directors, unlike LLPs. As a result, entrepreneurs can raise funding and attract fresh talent by offering employee stock ownership plans. If you’re looking to do either of the two in the near term, opt for the private limited company structure and register yourself. However, if you are planning to start a web development company or small business online, you might not need to avail of such features. If you are not looking to raise capital or funding for a few years, registering as an LLP might be more advantageous to you in the long run.
Benefits of LLP Registration
Cheaper to Start and Run
As a fledgling new business, entrepreneurs rarely have vast sums of money to throw around. Therefore, opting for a business structure that utilises the least amount of money possible is an excellent strategy to ensure better savings for the future. While you shouldn’t try to cut corners on legal matters such as documentation, you can try to save money elsewhere. Opting for Limited Liability Partnership registration enables business owners to reduce their registration costs significantly.
check here to more about: https://www.mca.gov.in/mcafoportal/showCheckLLPName.do
Let’s compare the costs of starting and running an LLP to a private limited company.
A private limited company costs at least ₹15,000 to start. Once you have completed the registration, you need to shell out at least ₹15,000 a year to comply with the MCA’s rules and regulations. Some of these compliance norms and documentation begin as soon as you incorporate them, leading to heavy costs for maintenance. Such business structures also require mandatory audits, which cost a minimum of ₹15,000. When you add all these costs together, running a private limited company will cost you up to ₹45,000 a year.
On the other hand, an LLP is much cheaper and easier to start and run. It costs around ₹11,000 to register, whereas MCA compliance management will only lead to expenses of around ₹4,000. Moreover, you only need to conduct an audit once your annual turnover exceeds ₹40 lakh and you possess paid-up capital of over ₹25 lakh. As a result, for the first few years, you can manage an LLP for the price it takes to incorporate a company.
Fewer Penalties
Many private limited companies fail to comply with MCA regulations leading to hefty fines of up to ₹1 lakh a year. With an LLP, since the costs of maintenance are low, it’s unlikely that you wouldn’t be able to comply. As a result, you can skip the hefty fines and penalties altogether, making it a more economical option.
Hence, if you are planning to start a business that doesn’t need to raise funding or attract employees through ESOPs, you should consider the LLP business structure. Not only will they keep your upkeep costs low, but they will make it easier for you to manage and comply with regulations. The money, time and effort you save can be put to better use on more integral parts of your business, leading to higher efficiency. However, make sure you think through such decisions as they can impact your business significantly.
How Can Vakilsearch Assist You?
Once you decide to register as an LLP, there are various licenses, permits, and registrations you must complete. While you can apply for those online by yourself, most entrepreneurs tend to take the help of professional services. Legal service providers such as Vakilsearch can help simplify the process and prevent unnecessary delays and hassles. Our team of legal experts will collect the required information and advise you on what type of business structure to choose. We will also apply for registration on your behalf and keep you updated every step of the way. Start the business of your dreams without any hiccups and delays with Vakilsearch by your side!
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