The efficiency of one partner affects the efficiency of another in a business partnership. LLPs eliminate this risk. This type of business structure allows entrepreneurs to begin joint ventures at the lowest liability possible. Additionally, an LLP is the safest form of business for startups and small businesses. A Limited liability partnership Act, 2008 governs and regulates the activities of corporate partnership bodies. Registration as an LLP requires understanding the registration process. If you have any concerns about Online LLP registration, here’s a handy resource for you.
Fundamental Features of LLP
Listed below are the characteristics of a Limited Liability Partnership:
- As LLPs are separate legal entities, their existence is distinct from that of their members.
- The flexibility of a partnership can be enjoyed by members of an LLP agreement.
- There is a confidentiality clause in the LLP agreement that must be respected.
- A Limited Liability Partnership must have at least two “designated” members.
- As with a company, an LLP must disclose its trading activity.
- The same accounting and filing requirements apply to a limited liability partnership as to a corporation.
- The income and gains of each member of an LLP are subject to tax.
- LLPs can issue debentures similar to companies on fixed or floating charges.
- For Limited Liability Partnerships, registration at Companies House is required.
- Last but not least, members of an LLP are limited in their liability
Benefits of LLP Registration in India
When deciding between LLP registration and private limited company registration, consider these benefits:
No limit for number of partners
In an LLP, a minimum of two partners is required, and the maximum is unlimited. A Private Limited Company, on the other hand, cannot have more than 200 members.
Incorporation of LLPs is relatively cheaper than incorporation of PLCs. A LLP can cost anywhere from Rs. 1500/- to around Rs. 2000/-. Private companies must pay a minimum statutory fee of Rs. 6000/-, while public companies must pay a minimum of Rs. 7000/-.
Least capital requirement
The advantage of LLPs is that they require the least amount of capital to begin operations. In addition to tangible and intangible contributions, partners may contribute movable and immovable property.
Less Compulsion for Audit
Public or private companies must have their accounts audited. There is no requirement for LLPs to do this, even though they are not obligated to do so. The Limited Liability Partnership Act, 2008 requires LLPs to review their accounts annually, except for those with less than Rs. 40 lacs turnover or Rs. 25 lacs contribution in a financial year.
A smaller compliance burden
Private companies are more burdened by compliance than LLPs. On the other hand, private companies need to comply with between eight and ten regulatory formalities and compliance requirements, whereas LLPs only need to comply with two statements.