Limited Liability Partnership (LLP), introduced only in 2008, has quickly become a popular legal structure for businesses. Its main improvement over the General Partnership is that, as the name indicates, it limits the liabilities of its partners to their contributions to the business and also offers each partner protection from the negligence, misdeeds or incompetence of the other partners.
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What is a limited liability partnership (LLP)?
LLP is an organization which combines the advantages of both a company and a partnership firm. It gives the partners the freedom of a partnership firm as well as the limited liability feature of a company so that the fault of one partner need not be borne by others. LLPs are governed by Limited Liability Partnership Act,2008.
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What are the Features of Limited Liability Partnership ?
No limit on owners of business : Limited Liability partnership may have partners varying from 2 to many. There is no limit for partners in Limited Liability partnership. An LLP requires a minimum 2 partners while there is no limit on the maximum number of partners in contrast to a private company wherein there is a restriction of not having more than 200 members.
No minimum capital requirement : Limited Liability Partnership can be started with the minimum amount of capital money. Capital may be in the form of tangible, movable asset like Land, machinery or intangible form.
Lower Registration Cost : The cost of registration of Limited Liability Partnership is low as compared to any other company (Public or Private).
No requirement of compulsory Audit : Limited Liability partnership are not required to audit the accounts. Any other company (Public, Private) are mandated to get their accounts audited by the auditing firm. LLP is required to audit their account only when crosses the turnover as prescribed.
Dividend Distribution Tax (DDT) not applicable : If the partners of Limited Liability partnership withdraw profits from the company, an additional tax liability in the form of DDT is not payable by partners.
Easy Transferability : Being a separate legal entity, it’s easy to transfer the ownership of the LLP to another person by admitting them as a partner of the LLP.
Partners cannot be sued : Partners are not liable to be sued in the name of LLP, as a juristic legal person LLP can sue in its own name.
Less compliance level : There is no need to maintain any statutory records except books of accounts. Less government intervention and less compliance level are enforced on an LLP as compared to the restrictions enforced on other business entities.
A private limited company can have maximum of 200 shareholders which restricts the scope of expansion and growth of the company.
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Once the LLP is Incorporated, we will send you LLP Certificate
How many people are required to form an LLP?
Minimum of 2 persons are required to form an LLP. There is no limit on the maximum no. of partners an LLP can have.
What is the minimum capital required to start an LLP?
There is no minimum amount of capital required to incorporate an LLP. A limited liability partnership can be started with any amount of capital.
What are the documents required to start an LLP?
Residence proof and ID proof are required for all the partners along with PAN card if the partner is an Indian national. No objection certificate along with ID and residence proof of the landlord of office premises is also required.
When is an LLP required to get it’s books audited?
If the LLP has a turnover of Rs.40 lakhs or more and/or has a capital contribution of Rs.25 lakhs or more, the financial statements should be audited.
What is Director Identification Number (DIN)?
DIN is a unique identification number which is allotted to all the directors existing or proposed. DIN can be obtained by filing e-form DIN1 in MCA portal.
What are the requirements to be a partner in a LLP?
Designated partner needs to be over 18 years of age. There is no restriction with respect to the nationality or citizenship.
Can a LLP undertake Not-for-Profit activities?
No. One of the requisite of an LLP is to carry on business for profit.
What are the compliance requirements for an LLP?
Filing of Income Tax Return, Service Tax/Sales Tax returns or both as may be. Payment of the above taxes and deduction of Income Tax at source may also be required in some cases.
What is a digital signature certificate (DSC)?
Digital signature is process to authenticate and validate records electronically. DSC is required for every director of the company as the Ministry of Corporate Affairs (MCA) mandates digital signature of directors on some documents.
Can an existing partnership firms be converted into LLPs?
Yes. An existing partnership firm can be converted into a limited liability partnership by following procedure laid down.