About Limited Liability Partnership (LLP)
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Easy to Form
It is very easy to form LLP, as the process is very simple as compared to Companies and does not involve much formality. Moreover, in terms of cost the minimum fees of incorporation is as low as Rs 800 and maximum is Rs 5600.
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Limited liability
Liability of shareholders is limited to the value of shares taken in the company. Therefore the personal assets of shareholders are free from the liabilities of the company. Liability of partners of a LLP is limited to his contribution. Their personal assets are free from the liabilities of LLP. However, if LLP has committed a fraud or a willful misconduct, the liability of LLP and partners committed fraud become unlimited.
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Perpetual Succession
Business Dictionary defines perpetual succession as continuation of an incorporated firm’s existence, unaffected by the death of any of its owner(s) or the transfer of its shares to a new entity or person. This is the main feature of a corporate business form whether it is a company or LLP
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No Mandatory Audit Requirement
Under LLP, only in case of business, where the annual turnover/contribution exceeds Rs 40 Lacs/Rs 25 Lacs are required to get their account audited annually by a chartered accountant. This provides great relief to small businessmen.
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Change of ownership
Company is most flexible form as share can be transferred freely. LLP--Ownership transfer is governed by LLP agreement. Usually, it requires consent of all partners.
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Reputation
Visibility and Brand, Capability to change with Time are the twin mantra of present business success. As corporate form have the advantage of separate personality from it members, you will get more acceptance from your clients, suppliers, financiers and customers.
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Raising Money
Financing a small business like sole proprietorship or partnership can be difficult at times. A LLP being a regulated entity like company can attract finance from PE Investors, financial institutions etc.
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Taxation
Another main benefit of incorporation is the taxation of a LLP. LLP are taxed at a lower rate as compared to Company. Moreover, LLP are also not subject to Dividend Distribution Tax as compared to company, so there will not be any tax while you distribute profit to your partners.
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