Limited Liability Partnership
An LLP is a unique form of legally recognized business vehicle, which integrates flexibility of a traditional partnership firm with the advantages of Separate Legal entity. As it contains the features of both Company and Partnership, it is rightly been called the HYBRID Entity.
LLP is governed by Limited Liability Partnership Act, 2008 which came into force on 1st day of April 2008. This Act was introduced with the idea of promoting MSME Sector (Micro Small Medium Enterprises) with the advantages of self governance and less compliances.
Minimum Requirement to Start A LLP
Limited Liability Partnership
LLPs are in law regarded as ‘bodies corporate’ and are subject to aspects of company law, but for tax they will generally be treated as ‘partnerships’. The members provide working capital and share any profits. Members who are individuals will be liable to pay income tax under self assessment, and self-employed Class 2 and Class 4 National Insurance contributions. Members who are companies will be liable to pay corporation tax on their share of profits.
The members of an LLP have limited liability, but the LLP is liable for all its debts to the full extent of its assets. To the extent that the members have contributed to those assets, a member risks losing that amount should the creditors claim those assets.
An LLP has unlimited capacity which means that third parties need not be concerned about any restrictions or activities.
Disadvantages of the Limited liability partnership
Inclusion of Indian Citizen as a Partner – An NRI/Foreign national who wants to incorporate an LLP in India shall have at least one partner who is an Indian citizen. Two foreign partners cannot form an LLP without having one resident Indian partner along with them.
Transfer of Ownership –If a partner wants to transfer his/her ownership rights then he/she has to obtain the consent of all the partners.
Filing of various returns – Public disclosure is the main disadvantage of an LLP. An LLP must file Annual Statement of Accounts & Solvency and Annual Return with the Registrar each year. Income Tax Return must also be filed to the Income tax department for the LLP.
Number of partners –A limited liability partnership must have at least two members. If one member chooses to leave the partnership, the LLP may have to be dissolved.
Non- recognition – LLPs are limited by state regulations due to which they are not given due recognition in every state as a business structure.
Huge penalties –The cost of non-compliance of procedural matters such as late filing of e-forms is very high which would lead to huge sum of penalties owing to Rs.100 for every day till the time the offence of late filing continues.
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At least two members are required for LLP registration.
Any individual/organization can become the partner of LLP including oreigners /NRI’s
No. For any licenses, permits, registrations, properties, approvals, etc., belonging to prior Partnership Company, the newly formed LLP must follow the required procedures with concerned authorities to transfer the assets.
legalsuvidha.com can incorporate an LLP in 14-20 days. The time taken also depends on relevant documents provided by the applicant and the speed of approvals from the government. To ensure speedy registration, please pick a unique name for the proposed LLP and make sure you have all the required documents before starting the registration process
The LLP shall ensure that for twelve months commencing not later than 14 days after the date of registration, every official correspondence of the LLP bears the following:
• A statement that it was, as from the date of registration, converted from a firm into LLP
• The name and registration number, if applicable, of the firm from which it was converted
The main advantage is that in an LLP, there are fewer formalities after the business has been incorporated. For example, you need not file annual returns, etc. unless your income crosses a certain limit. An LLP is preferable if you are offering professional services, like a lawyer or architect. A Pvt. Ltd. The company is preferred if you want to launch a scalable enterprise
Once the procedure to convert Partnership to LLP comes to complete and the registrar provides the certificate of registration, the firm must follow the rules and regulations as applicable to LLPs.