LLP in India has many advantages as it is a new growing business structure. LLP is a new concept while participation is an old concept. LLP and Partnership are different as Partnership is an old concept whereas LLP Limited is a newly established concept introduced in India by the Liability Partnership Act, 2008.
Advantages of LLP include both the benefits of partnership as well as the company’s asset.
The benefits of LLP (limited liability partnership) are:
Businesses are easy to start and manage like entrepreneurs. LLP agreements are customized according to the needs of the respective partners. There is less formality in the areas of legal compilation, annual meeting, resolution than any other private limited company. For a detailed comparison between LLP and Private Limited, read Choosing between LLP and Private Limited.
No minimum capital required
LLP can be initiated with a minimum amount of capital. Capital can be tangible, movable property such as land, machinery or intangible. In case of private company the capital requirement (requirement of registration of private company) and public company (requirements for registration of public company) is Rs. 1, 00,000 and Rs. 5,00,000 respectively whereas there is no such mandatory capital requirement specified under LLP.
No limit on business owners
LLP can have many from partner 2. There is no limit for partners in LLP. A LLP requires a minimum of 2 partners, while there is no limit to the maximum number of partners, unlike a private company, which has a restriction of not having more than 200 members.
Low registration cost
LLP registration costs less than any other company (public or private). Read the cost comparison of LLP, OPC, Private Limited, Partnership, Proprietorship.
No mandatory audit required
LLP does not require audit of accounts. It is mandatory for another company (public, private) to get its accounts audited by the auditing firm. LLP is required to audit its account in the following situations:
When LLP contributes Rs. More than. 25 lakhs, or
When LLP has an annual turnover of Rs. 40 million
6. Saving from low compliance burden
LLPs faceless compliance burden as they have to submit only two statements i.e. Annual Return and Statement of Accounts and Solvency. Whereas in the case of a private company, at least 8 to 10 regulatory formalities and compliance are required to be duly completed. Read the annual cost comparison of Private Limited and LLP.
Taxation aspect on LLP
LLP is not liable to pay tax on the income and shares of its partner. Thus, no dividend distribution tax is payable under section 40 (b). Bonus, commission or remuneration, interest to partners, any payment of salary, allowed as deduction. The provision of vision deemed dividend under the Income Tax Act is not applicable to LLP.
(DDT) Not Applicable
If the partners of LLP withdraw profits from the company, additional tax liability in the form of DDT is not payable by the partners. Whereas, in the case of a company, the owners have to pay DDT @ 15% (surcharge and educational cess). Therefore, the benefit of LLP is in the hands of its partners, easily withdrawn by the partners.
Benefits of limited liability partnership
Limited Liability Partnership (LLP) is a corporate business vehicle that provides both the benefits of a company and the flexibility of a partnership firm i.e. limited liability and organizes its internal structure as a partnership based on a mutually agreed agreement to its members Allows to do. Limited Liability Partnership Units, a globally recognized form of the trade organization, have now been introduced in India through the Limited Liability Partnership Act, 2008.
LLP has its advantages over traditional partnerships and private limited, as it is superior to both of these structures in a solid viable package. It presents various challenges that an entrepreneur faces when using a traditional partnership structure. The differences between private limited and limited liability are many, here we are covering the benefit of only one LLP: –
– The biggest advantage of doing business as an LLP is that each partner’s liability is limited to the extent of their ownership/contribution as opposed to a sole proprietorship or traditional partnership firm, where the owner’s personal property occurs. Our partners may be at risk in the event of business failure. Thus this mode helps the partners to be free from personal liabilities. Unlike proprietorships and partnerships, if an LLP becomes insolvent and wound up, only the LLP’s assets are used to clear its debt. The partners of LLP have no personal liabilities and are not made insolvent and are free to operate as trusted businessmen.
No minimum capital contribution required: – Private Limited Companies Rs. 1 Lac. Even contributions can be made in installments which gives small entrepreneurs/startups the benefit of these benefits.
Separate Legal Entity: – LLP is different from its affiliates.