Limited liability partnership

Limited Liability Partnership

LLP is a limited liabilities partnership firm, which is form and acts as a body corporate further but in the taxation aspect, it is similar to a general partnership.

An LLP is a recognizable business form similar to a corporate body, which inclusive of all provision of a traditional partnership firm with the advantages of a Separate Legal entity. As it contains the features, legal provision of both Company and Partnership, we can say it the HYBRID Entity.

LLP is governed by the Limited Liability Partnership Act, 2008 which came into force on 01/04/2008. This Act was introduced with the idea of promoting the SMEs MSME Sector (Micro Small Medium Enterprises) to govern their business of corporate style with the advantages of self-governance and less compliance.

Following are the benefit of LLP

1. The important advantage of an LLP is that LLP is easier to start and manage and the process has lower formalities.
2. It has a low cost of registration as compared to a Company.
3. LLP is a separate body.
4. LLP has no minimum requirement for capital.
5. The partners would have limited liability to their agreed contribution in the LLP.
6. No requirement for compulsory Audit.
7. Annual compliance is lesser than companies.
Limited liabilities

LLP liabilities are unlimited to the extent of its assets similar to a private limited company. And member’s liabilities are limited to the extent to its contribution.

LLP is incorporated by that person who has interested in consulting, trader, professional firm, but there is no restriction for any person. It has unlimited capacity for any activities done under LLP.

Disadvantages of the Limited liability partnership

Inclusion of Indian Citizen as a Partner – if any foreign person /NRI who wants to incorporate an LLP in India shall have at least one partner who is an Indian citizen. It means two foreign partners cannot form an LLP without having one resident Indian partner along with them.
Transfer of Ownership – Consent must require from all partners while transferring their ownership to other people.
Filing of various returns – It is the same as private limited all LLP have to disclose their document publicly. By filing Annual Statement of Accounts & Solvency and Annual Return with the Registrar each year and also must filing of Income Tax Return by LLP.
The number of partners –Minimum two partners required in LLP. If any one member wasn’t s to leave the LLP, the LLP would be dissolved.
Non- recognition – LLPs are limited by subject to state regulations due to which they are not given due recognition in every state as a business structure.
Huge penalties – LLP is for SMEs but still has noncompliance penalties that are Rs.100 for every day till the time the offense of late filing continues.