Limited Liability Partnership (LLP)
What is Limited Liability Partnership?
Limited liability partnership is a combination of both partnership and corporation. It has the feature of both these forms. As the name suggests partners have limited liability in the company which means that personal assets of the partners are not used for paying off the debts of the company. Nowadays it has become very popular form of business as many entrepreneurs are opting this. There are a number of partners in the firm and hence they are not liable or responsible for others misconduct. Every one is liable for their own acts. All limited liability partnership is governed under the limited liability partnership act of 2008. However in India LLP was introduced in April 2009.
Benefits of Incorporating a Limited Liability Partnership
- Easy to form- Forming an LLP is an easy process. It is not complicated and time consuming like the process of a company. The minimum amount of fees for incorporating an LLP is Rs 500 and the maximum amount which can be spent is Rs 5600.
- Liability- The partners of the LLP is having limited liability which means partners are not liable to pay the debts of the company from their personal assets. No partner is responsible for any other partner misbehaves or misconduct.
- Perpetual succession- The life of the Limited Liability Partnership is not affected by death, retirement or insolvency of the partner. The LLP will get winded up only as per provisions of the act of 2008.
- Management of the company- All the decisions and various management activities are seen and done by the directors of the company. Shareholders receive very less power as compared to the board of directors.
- Easy transferability of ownership- There is no restriction upon joining and leaving the LLP. It is easy to admit as a partner and to leave the firm or to easily transfer the ownership on others.
- Taxation- Yes, it is the benefit of LLP. Limited liability partnership is exempted from various taxes such as dividend distribution tax and minimum alternative tax. The rate of tax on Limited Liability Partnership is less than as compared to the company.
- No compulsory audit required- Every business has to appoint an auditor for checking the internal management of the company and its accounts. However, in the case of LLP, there is no mandatory audit required. The audit is required only in those cases where the turnover of the company exceeds Rs 40 lakhs and where the contribution exceeds Rs 25 lakhs.
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Limited Liability Partnership Incorporation
- Incorporation of LLP and includes complete documentation and filings
How Does it Work?
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Frequently Asked Questions
Name reservation: The first step to incorporate Limited liability partnership (LLP) is reservation of name of LLP. Applicant has to file eForm 1, for ascertaining availability and reservation of the name of a LLP business.
Incorporate LLP: After reserving a name, user has to file eForm 2 for incorporating a new Limited Liability Partnership (LLP).
eForm 2 contains the details of LLP proposed to be incorporated, partners’/ designated partners’ details and consent of the partners/ designated partners to act as partners/ designated partners.
LLP Agreement: Execution of LLP Agreement is mandatory as per Section 23 of the Act. LLP Agreement is required to be filed with the registrar in eForm 3 within 30 days of incorporation of LLP.
Yes, an existing partnership firm can be converted into LLP by complying with the Provisions of clause 58 and Schedule II of the LLP Act. Form 17 needs to be filed along with Form 2 for such conversion and incorporation of LLP.
Yes, any existing private company or existing unlisted public company can be converted into LLP by complying with the Provisions of clause 58 and Schedule III and IV of the LLP Act. Form 18 needs to be filed with the registrar along with Form 2 for such conversion.
Yes, it mandatory to execute and file LLP Agreement in view of Section 2(0) & (q) , 22 and 23 of the Act.
As per provisions of the LLP Act, in the absence of agreement as to any matter, the mutual rights and liabilities shall be as provided for under Schedule I to the Act. Therefore, in case any LLP proposes to exclude provisions/requirements of Schedule I to the Act, it would have to enter into an LLP Agreement, specifically excluding applicability of any or all paragraphs of Schedule I
A name, once approved by the Registrar, shall be available for registration of an LLP for a period of 3 months from the date of intimation by the Registrar. (Rule 18(6) of LLP Rules, 2009)
The process time for registration of an LLP is 14 days from the date of submission of all the aforesaid documents and filing of registration fees. (Rule 12(1) of LLP Act, 2008)