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Limited Liability Partnership
A Limited Liability Partnership continues to magnify the characteristics of an unincorporated partnership even closer to those which are regulated corporate organization because the LLP is recognized as a distinct legal entity from the individual partners. Subsequently, it provides certain degrees of limited liability to general partners especially related to negligence claims. A limited liability partnership is a partnership whose liability is limited to the capital invested by each for starting the business. In an LLP the partners are not personally liable with personal property to furnish the firm’s debt or liability.
On top of everything, such an entity has least compliance requirements and need not conduct an external audit of its books until the turnover of LLP is forty lakhs rupees or a paid up capital portion of twenty five lakhs rupees per year.
LLP registration in India
In 2008, the concept of LLP was made known and probably it has gained so much importance thereafter. LLP is a unique combination of historic partnership and a modish limited company and therefore it offers absolute interest of both the entities.
However, like every coin has two views LLP registrations too have some advantages and hence in some cases it can be said to be an ideal form of business. Hence for better understanding we have summarized the cases into advantages form.
So here are the advantages why LLP registration is a good idea.
Advantages
An LLP is a separate legal body. This means that it has assets in its very own name and can sue and be sued. Moreover due to misconduct of one partner the other partner is not responsible or liable.
It is easy to start and manage a business like entrepreneurs. LLP agreements are modified in accordance to meet the needs of the designated partners or concerned partners in the firm.
As compared to the other entities not only it is easier to start off but it is also easier to end an LLP as well. While LLP quiet takes two to three months to complete this practice but a company takes over a year to close.
An LLP is much easier and cheaper to carry out a business than a company as there are just three compliances to follow. On the other side a company has a bundle of compliances to comply with and conduct an audit of its books.
The biggest motive of forming an LLP is the limited legal liability and the supple management roles. Unless misconduct has been identified the personal property of the partner are relaxed from any liability. The liability of the designated partners is defined to the extent of his or her portion to the LLP.
The designated partners are free to outline the agreement as they please with respect to their privileges and obligations. Under the framework each partner has the right to govern the LLP and have the right to choose how much management that they require. Thus partners have a very operative role or even turn as a silent in the LLP.
An LLP has designated partners who own and cope with the business. This is dissimilar from a company whose directors may be unlike from shareholders. For this cause venture capital does not invest in the LLP structure.
Unlike general partnerships an LLP does not depict its partners to infinite legal liability. Put differently if someone prosecutes the LLP the partners will not be open-endedly liable for that amount.
An additional big profit of LLPs is that it has cut-through tax such that it escapes dual taxation. LLP designated partners will only pay-off their own income taxes but the LLP will not be taxed as a business entity.
The charge of registration of LLP is near to the ground as compared to any other company like public or private.
With an LLP given its small overheads it’s unlikely that you wouldn’t be able to meet the terms. This would make sure that you miss the fines all in all. An LLP is a worthy call, if you are opening a business that is not expected to nurture funding or bid ESOPs to employees. It will retain your startup charges low and guarantee that you aren’t in a row to fulfill the compliances instead of running your business.
The prime benefit for an LLP is that it institutes a discrete legal body from that of the general partners. As such an LLP may possess property as well as sue and be sued in a legal dome. By far the most valuable aspect of discrete legal status is the limited liability security it make available. Leading general partners are safe from claims against the LLP. Within the industries of certain professions including lawyers, accountants, and architects, the isolated legal status of the LLP provides a definite grade of shelter for the personal assets of the general partners against seizure resulting from hearing against the LLP. For example if a law firm is litigated and a judgment is conferred the personal assets (including checking/savings accounts, automobiles, and even homes) of the single partners are secured.
Since LLP establishments do have legal magnitudes and require partners to describe their roles it is great to have a professionals draft these agreements. Any errors in the registration process will delay formation process and subject the partners to unlimited personal liability.
Conclusion
If you want to go into an Limited Liability Partnership, then you need to get it registered under the Act. You will need to devote time and money in the official papers and legal formalities of incorporation of the business. Nonetheless, you cannot have confidential business undertakings as you have to fulfill the legal requirements.
As said, there may be numerous gains or hindrances related with the number of form of business. Hence the verdict should be taken based upon the current needs and future plans so that one doesn’t have to suffer at a far ahead stage.
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06 Mar
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