Is the LLP structure well suited to attain the aspirations of an eager entrepreneur? If so, to what extent? Keep on reading to know more.
Reasons Why a Limited Liability Partnership is Preferred by Entrepreneurs in India
- Tangible assets are physical assets such as land, vehicle, computer, furniture, inventory, stock, cash etc and intangible assets that lack physical presence such as patents, goodwill, trade names etc. can act as capital contributions as there is no minimum capital mandated. This is why entrepreneurs prefer to form limited liability partnerships in order to participate in the marketplace with small or alternative initial investments.
- Moreover, an LLP may be founded with the smallest amount of money, even as little as ₹ 1/-, making it the preferred option of business idea owners today.
- Because the registration fee of an LLP is determined by the amount of contribution, which varies according to the level of capital contribution, it is less expensive than forming a private limited or a public limited business.
- There is one more noteworthy benefit with these which is namely, that the responsibility of the partners is limited to the level of their investment in the LLP and no further exposure of personal assets of the partner is risked, save in situations of fraud.
Ways in Which a Limited Liability Partnership is Suitable for Entrepreneurs in India
The number of partners
A limited liability partnership must have at least two partners, one of whom must be a designated partner. Because there is no maximum number of partners, an LLP can be formed by a small group of entrepreneurs who wish to launch their business at the early stage without the backing of supportive shareholders.
Limited liability protects the partners from infinite liability. Moreover, Limited Liability Partnerships (LLPs) offer limited liability protection and require members to contribute only the sum of money they wish to put into the company.
Every year, a limited liability partnership only needs to file an annual return, statement of accounts, and proof of solvency. As a result, there is no need to file returns and paperwork on a constant basis, which can be quite a hassle for aspiring entrepreneurs.
An LLP can be formed in as little as 10-15 days. Entrepreneurs wishing to launch their firm swiftly can do so.
The Reserve Bank of India has even permitted foreign direct investment on an automatic or approval basis in many sectors for LLPs. Moreover, if FDI clearance has already been granted, a limited liability partnership can even issue ECB.
The Bottom Line
An LLP’s limited liability safeguards stakeholders’ private assets and income during a financial crisis which frequently occurs during the initial stages of entrepreneurial efforts. Hence, for this reason, and the ones outlined above, we can conclude that an LLP is suitable for those looking to launch their business on the wing of entrepreneurship. Get in touch with our team today and bring your dream to life!
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- Procedure for Registration of Trademark