REGISTRATION OF LIMITED LIABILITY PARTNERSHIP Limited liability partnership is a form of organization which has both the integrated features of a company and partnership firm. Thus LLP enjoys the benefits of a company as well as general partnership. For incorporation of LLP there is a requirement of minimum two partners, and every partner shall have its own liability towards the business. The annual compliances involved in LLP are minimal and is a perfect option for service providers, such as consultants. Thus, it is a partnership in which some or all members have limited liabilities, which means one partner is not responsible for other partner’s negligence or misconduct.
How is LLP different from Private Limited Company?
s.no. 1. 2. 3. 4. 5. 6.
feature ACT Registration Separate legal entity Perpetual succession Legal proceeding Books of account
Limited Liability Partnership Limited liability partnership Act, 2008 Mandatory, under MCA Yes( separate from its) yes
Private Limited Company Companies Act, 2013 Mandatory, under MCA. Yes ( separate from members/ directors ) yes
Can sue, and be sued
Can sue, and be sued.
Prepared under limited liability partnership Act, 2008
Prepared under Companies Act, 2013
Advantages of LLP Liability is limited: the liability of the partners is limited in the LLP to the amount of contribution they put in the LLP. It being a separate legal entity functions apart from its partners. The liability for repayment of the debts and lawsuits incurred by the LLP lies on it and not the owner. Flexibility: The compliances part of the LLP are less and also gives a discretion to the partners to decide the way they want to manage the organization. Less compliances: as the compliances in the LLP are less it is preferred a lot, as compared to private company, the compliances are less. Tax advantage: it is an added benefit as the taxation is at the lower rate as compared to company. LLP is not supposed to pay the Dividend distribution tax so it adds to the benefit to the partners.
Disadvantages of LLP Less business credibility: the business of the LLP is often considered less credible as compared to company. People have less faith in LLP than a company. Less sector oriented: The LLP’s are more oriented towards the service sector than other fields.
Tenure: It takes around 10 days to incorporate an LLP.