Limited Liability Partnership is a form of legal entity in which all the partners or some partners have a set of limited liabilities and their responsibilities in the business are limited.
Key Points to Remember:
It is generally run by the partnership and cooperation between the partners for which they need to be very reliable and thus it involves a lot of trust risk.
Each partner will have their own responsibility and liability and no other partner shall be responsible for the other partner’s liability or mistakes.
Unlike traditional partnerships where all the partners have equal and unlimited liabilities here everyone has their own limited liability.
All the partners are the stakeholders; however, they are given direct access to control and monitor the business directly which is not given to stakeholders in the corporation.
That is why the board of Directors is needed for a corporate company and for Limited Liability Partnership there are no such requirements.
The taxation policy for an LLP is different from companies and is much simpler and small in comparison to them.
In many countries like India in case of a Limited partnership, there exist at least one partner who has the unlimited liabilities and the other partners may be allowed to the limited liability investor and in return, their role will be passive. Thus in such countries, it’s better to choose an LLP as a form of business in comparison to a limited partnership so that all the partners enjoy an active role in the business. All the LLPs in India are registered under the Limited Liability Partnership Act, 2008.
Benefits of a Limited Liability Partnership:
The internal structure of an LLP is less complex and easy to organize in comparison to a company.
You can have any number of partners and there is no legal maximum number of partners required for an LLP however, obviously the minimum required number is 2.
The fundraising and utilization is completely dependent on the partner’s will and say. However they have to follow the rules of Companies Act 2013.
You can save your amount of Dividend Distribution Tax, as you do not have to pay it for LLP while in case of the company it’s compulsory.
It’s very useful for professional like the Doctors, Advocates, Chartered Accountant and Engineers to register themselves as LLP.
There is no such minimum amount of capital that is required to start an LLP, unlike a company which requires certain fixed minimum funds to be invested.
There are no compulsory audits required, unlike companies where regular audits are mandatory.
Disadvantages of a Limited Liability Partnership
The LLP cannot raise money or funds from the public.
The act of one partner without the consent of another partner may bind the LLP.
How to Register for an LLP?
The First step is to get the digital signatures of all the partners.
All the partners need to apply for DIN i.e. Director Identification Number which is mandatory to become a partner.
Apply for the approval of the name of the LLP.
Get the Certificate of Incorporation from Indian Registrar of Companies as it is a proof of registration.
Then apply for the PAN (Permanent Account Number) of LLP.
File all the related documents of the LLP and also apply for the current bank account which is a mandate.
