In recent years, Limited Liability Partnership (LLP) has become so popular that many of the entrepreneurs prefer this. The LLP is dominant not only in India but also in various countries like Australia, China, Canada, etc. The LLP is fulfilling the business need that combines the flexibility of the partnership and advantages of LLP acquired through the company at a lower cost.
What is LLP?
A Limited Liability Partnership or an LLP is referred to as a partnership in which all the partners or all the members have limited liabilities. In the LLP since the number of partners in this firm is large, no partner is responsible for the misconduct or carelessness whereas they share partnerships and corporations. The partners of the LLP have the right to manage the business directly which is not the case in corporate shareholders.
LLP in India
The LLP in India came into existence under the guidance of the Limited Liability Partnership Act 2008 which was published in India on 9th January 2009 and this act is in effect from 31st March 2009. The rules and regulations of this act were published on 1st April 2009 and came into effect in 2017. An LLP is similar to a limited partnership, but here each partner is protected from his personal liability but has to donate from their capital.
Features of LLP in India
The LLP is a legal entity that stays separate and it would possess perpetual succession. In LLP, one of the partners must be a citizen of India. Like any other partnership firm, an LLP is treated in the same way in terms of taxation (service tax or other taxes), in India. No individual partner is responsible for the unauthorized actions of the other members, hence the partners are protected from other partners’ misconduct or their unlawful decisions. The maximum number of partners in an ordinary partnership firm cannot exceed 20 but in an LLP there is no limit for the number of partners it should have.
The Registrar of Companies (RoC) would register as well as control LLPs. One main feature of the LLP is that no mandatory audit is required whereas in all other business firms it is important to appoint an auditor for checking the financial statements inside the company. But in any LLP company where the turnover exceeds Rs 40 lakhs and where the contribution of the capital exceeds Rs 25 lakhs, an audit is required. The process of joining and exiting an LLP is an easy one.
Advantages of being in an LLP in India:
There are a lot of advantages that can be enjoyed by being a partner in the LLP in India. Both the partner as well as the company are benefited. Some of the advantages are:
- It is more convenient than the other Private Limited Company. It is easy to start and manage the business for young entrepreneurs as there are only a few formalities required in sectors like a legal compilation, the conduct of annual meetings, etc.
- There is no minimum limit for capital money, whereas in the case of public or private companies a particular amount of capital is mandatory.
- A minimum of two partners are required for an LLP but there is not any upper limit for the number of partners in the business. Other private companies have a restriction of having members not more than 200.
- The registration cost when compared to the other Public or Private companies is low.
- Auditing of the account is not needed in an LLP. It becomes an essential one only when the turnover or contribution exceeds a particular amount.
- LLP isn’t alwayssusceptible to pay the tax at theprofits and proportion of its partner. Bonus, fee or remuneration, Interest to partners, any price of salary are allowed as deduction. The provision of ‘deemed dividend’ belowprofits tax law, isn’t alwaysrelevant to LLP.
- LLP has to face much less compliance burden as they should post most effective statements i.e. the Annual Return and Statement of Accounts. Whereas in the case of a private company, at least eight to ten regulatory formalities and compliances are required to be duly completed.
Procedure to form an LLP in India:
To register for an Indian LLP, you may have to apply for a unique Designated Partner Identification Number (DPIN) and also would require a Digital Signature Certificate. The LLP name must be approved by the Ministry Corporation of India. There are some steps to be followed to form an LLP in India.
- Apply for the Designated Partner Identification Number (DPIN)]
- Register for the Digital Signatures Certificate (DSC)
- Register yourself for a new user registration
- Incorporate an LLP
- File for an LLP agreement
If you wish to turn an existing partnership into an LLP you must apply through Designated Partner Identification Number Form 17 along with the Subscribers document and Incorporation document.
It would take about 15 days for the registration process if all the required documents are available. Assistance from an expert for completing the online process and other procedures would make your work simple.
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