WHAT IS LIMITED LIABILITY PARTNERSHIP?
LLP (Limited Liability Partnership) is an act which is firstly introduced in India under the Act of 2018, the main purpose to establish this Act is to offer a form of business entity that is simply maintained while LLP provided to the owners. In a common business Partnership, you don’t need any documentation to establish your Partnership. A common Partnership is one in which all the persons can manage and control all the business and you can also take any kind of legal and official decision. If any of the partners are liable to pay his debts and loss, then along with that person other people have also pay the debts.
On the other hand, In LLP, there is required a Partnership Agreement. In this, some required information about the partners and business must be filled. A limited member is one in which he or she is not responsible to pay all the other personal debts. But they can lose their investment in the business. They have no authority to run all the business lonely. These members have a general partner which has the authority to run the business or take the legal or major decisions. The agreement specifies all the roles and responsibilities of that general person along with the liable person.
In this agreement, each partner has a right that he or she can leave anytime from the partnership and the new person can be added to this partnership anytime.
Choose LLP because:
- Dual advantages- Company and a Partnership
- No partner will be responsible for other partner’s misconduct
- Cheaper to incorporate than a private limited company
- Limits the liabilities of its partners
- Easily Transferability
- Not Required Audit
What are the advantages of registering a business as an LLP?
- Limited Liability of Partners
Because an LLP can enter into a contractual relationship in its own capacity, it offers a great advantage to the partners for limiting their personal risk. Liability of financial contribution of any partner is restricted to the capital contribution as per the LLP agreement. Many new age businesses prefer LLP registration over partnership so that their personal assets remain safe in case of loss, or even insolvency. Further, one partner is not held responsible for the actions of negligence or misconduct of any other partner.
- Operational Flexibility
LLP Agreement, deed among partners of an LLP, clarifies operating structure including rights and responsibilities of the partners. Typically, LLP would select a “Designated Member” who would control day-to-day operations. It can have individuals or existing businesses as members. Further, this structure allows to clearly define roles of the partners and their respective responsibilities. It could also help in protecting partner’s interest in case of loss because of an unlawful act of any other partner.
- Separate Legal Existence
Registration of LLP creates a separate legal identity than its partners. Governed by the LLP Act of 2008, it allows the business to contract with other entities, take legal action, own assets and borrow funds in the name of an LLP itself. It is a major advantage that is not available to a regular partnership firm.
- Lower Compliance Requirement
A key benefit of registering an LLP over a private company is lesser compliance requirement. It doesn’t have a mandatory audit requirement until a certain level of turnover or contribution. Unlike companies, compliances related to board meetings, statutory meetings, etc. do not apply to LLPs. Professional services for compliance are typically available at cheaper rates than that for companies, making it cost effective to maintain an LLP.
Documents Required For LLP Registration
- Copy of PAN Card of partners
- Passport size photograph of partners
- Copy of Aadhaar Card/ Voter identity card
- Copy of Rent agreement (If rented property)
- Electricity/ Water bill (Business Place)
- Copy of Property papers (If owned property)
- Landlord NOC (Format will be provided)
Minimum Requirements For LLP Registration
- Minimum 2 Partners
- No Capital Requirement
- At least one Designated Partner as Indian Resident
- DPIN for all Partners
LLP Name Structure:
- Unique Name-Helps in easy approval of name, and to create distinct identity
- Business Object-Clearly communicate your business activity
- Constitution Type-The name of the registered LLP must end with LLP or Limited Liability Partnership as a suffix