Company IncorporationLLP

Minimum Requirement of Capital for Starting an LLP?

The LLP is a separate legal body and body corporate from its partners. It enjoys the benefits of perpetual succession. But how much capital is required to commence business as an LLP? Let’s find out.

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What Is an LLP: an Overview

An LLP is a type of alternative corporate business structure that combines the benefits of a company’s limited liability with the flexibility of a partnership.  An LLP can continue to exist even if the partners decide to exit. It has the ability to enter into contracts and hold property in its own name. Now, let’s see the minimum capital required for starting an LLP.

In fact, it is a separate legal entity that is liable to the full extent of its assets, but the partners’ liability is limited to their agreed contribution to the LLP. Furthermore, no partner is accountable for the autonomous or unauthorised activities of other partners, therefore individual partners are protected from joint responsibility resulting from another partner’s unlawful business choices or wrongdoing.

The mutual rights and obligations of the partners in an LLP are controlled by an agreement between the partners or, between the partners and the LLP. However, the  LLP, on the other hand, is not exempt from accountability from its obligations and duties as a distinct business. Because an LLP incorporates features of both a corporate structure and a partnership firm structure, it is referred to as a ‘hybrid’ between a corporation and a partnership.

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Minimum Requirement of Capital for Starting an LLP

The essential prerequisite for establishing any commercial structure for trade is the requirement of capital, the importance of this cannot be neglected. Usually, the laws regulating various business vehicles require a particular level of initial capital contribution at the time of incorporation or establishment.

The phrase ‘minimum capital’ refers to the amount of financial contribution needed from the founders during the incorporation of an LLP or from persons during their admission as a partner in an already existing LLP.

There is no mandate that the partners must contribute a minimum amount of capital, and everything connected to the capital contribution aspect of an LLP will be established solely by the LLP agreement’s terms. The legislature’s intention in enacting the LLP Act was simply to give the LLP agreement entered into by the parties paramount importance, and thus the basic requirement in all business structures, notably capital contribution, has indeed been left to the discretion of the stakeholders, and nothing in the LLP Act has been earmarked as minimum paid-up capital or minimum capital requirement.

Hence, it can be concluded that there is no concept of share capital in a limited liability partnership like there is in a corporation, but there must be some investment from partners, known as partner’s capital, in order to create an LLP. in fact, the contribution of a partner might be in the form of tangible, moveable, immovable, and/or intangible property, as well as any other benefit to the LLP.

Get in touch with Vakilsearch today to start an LLP with the capital requirements of your needs and desire!

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