Limited Liability

Overview

LLP is a form of corporate business vehicle that enables professional expertise and entrepreneurial initiative in order to combine and operate in flexible, innovative and efficient manner, providing benefits of limited liability and allowing its members to be flexible for organizing their internal structure as a partnership.

For Limited Liability Partnership advantages and disadvantages are there and one needs to choose wisely which form of business he needs to opt for. In addition, if one does not want to disclose any secret of his business idea he can plan to start a One Person Company.

It requires a minimum of two partners for formation of an LLP. There will not be any limit to the maximum number of partners. It is mandatory for every designated partner to obtain a “Designated Partner’s Identification Number” (DPIN). In comparison to Limited liability Company, LLP is a professional business whereas the former is a small business with few shareholders.

Essentials of LLP

  • They have the organizational flexibility of a partnership
  • They must have at least two “designated” Members.
  • Their “trading disclosure” requirements are similar to those of a company.
  • They must be registered at Companies House.
  • Their accounting and filing requirements are similar to those of a company.
  • They have the ability to create floating charges.

Key Characteristics of Limited Liability Partnership, India

  • Separate legal entity from its Members.
  • Benefit of limited liability for Members.
  • Taxed as a partnership
  • Organizational flexibility of a partnership
  • Governed by agreement (“LLP agreement”)
  • Accounting and filing requirements: similar to company.


Process


Registration of LLP in India
  • Name Reservation
  • Incorporate LLP (e-form 2)
  • LLP Agreement


Pros & Cons


Advantages
  • No upper limit for no. of partners in LLP
  • Registered with the Ministry of Corporate Affairs (MCA)
  • Limited Liability
  • Tax advantages
  • Easy and cheaper to start and maintain
Disadvantages
  • Difficulty in transferability of shares
  • Problems in Admission of new partner
  • Cannot raise money from Public


FAQs :


1. What is a Limited liability partnership (LLP)?

An LLP is a new form of business which is basically a partnership firm but with limitation on the liability of the partners of the LLP. A LLP is considered as a separate legal entity, perpetual succession, with liability of partners limited to the capital being contributed by them.

2. What is the minimum requirement for number of partners to form an LLP?

Minimum two persons or partners are required to form a LLP and can have a maximum of any number of partners.

3. Under which act of parliament an LLP is formed and governed

LLP is formed and governed by Limited Partnership Act, 2008.

4. What are the requirements to become partners of the LLP?

The designated partners must be a natural person and have attained 18 years of age. Foreign nationals, foreign companies & LLP can incorporate a LLP in India subject to at least one designated partner is resident in India.

5. What is the minimum number of partners required to register LLP?

A minimum of two designated members are required to register an LLP. The designated members are responsible for overall operations of the firm.

6. What are the responsibilities of a designated partner?

The designated partner(s) has been entrusted with the responsibility of managing the LLP in the best efficient manner. A designated member is liable for misconduct or fraud or if found guilty by default.

7. What are the documents required to start a LLP?

Latest passport size photograph, Identity and residence proof for all proposed directors, registered office address proof. Income tax PAN is mandatory for Indian nationals.

8. What are the requirements for office to start a LLP?

An address is required as registered office of the LLP. It can be commercial/residential/industrial.

9. Is LLP structure suitable for my business?

The biggest advantage of starting a business with LLP form of organization is the outlook by all outside parties towards the business.

10. What are annual filing compliance requirements for an LLP?

a. Annual return

b. Financial statements of LLP

c. Income tax return filings.



Compare your alternatives

Below is the comparison between Sole proprietorship, Partnership, Private Limited Company, Limited liability partnership, One person company and Public limited company