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Limited Liability Partnership


Limited Liability Partnership as its name suggests is a corporate version of partnership Firm. This form of business was introduced to provide limited liability to partners against act of misconduct of other partner. Thus, LLP comes with advantages of Private Limited Company and convenience of Partnership Firm.

Owing to flexibility in its structure and operation, it would be useful for small and medium enterprises, in general, and for the enterprises in services sector, in particular. Internationally, LLPs are the preferred vehicle of business, particularly for service industry or for activities involving professionals.


Features

LLP is regulated by Limited Liability Partnership Act, 2008.
Mutual rights and duties of partners of an LLP inter se and those of the LLP and its partners shall be governed by an agreement between partners or between the LLP i.e. LLP Deed.
The LLP will be a separate legal entity, liable to the full extent of its assets, with the liability of the partners being limited to their agreed contribution in the LLP.
Concept of Designated Partner similar to working partner who act like Director. Every LLP shall have at least two partners and shall also have at least two individuals as Designated Partners, of whom at least one shall be resident in India.
Registration is required to be done with Ministry of Corporate Affairs.
Process of incorporation is similar to Private Limited Company.

Advantages of a Limited Liability Partnership

Limited Liability

In case of financial distress in LLP business, the personal assets of partners will not be at risk of being liquidated. Liability of the partners will be limited to their agreed contribution in the LLP.

Separate Legal Existence

Limited Liability Partnership has got separate legal existence than its partners unlike in case of proprietorship and partnership where business and owners are the same.

Perpetual Succession

Limited Liability Partnership Business not affected by the death of the Partners. Business continues to exists till the time it is wound up as per the provisions of the Law.

Greater Borrowing Capacity

In today’s era more and more capital is required to run and scale up the business activity. Limited Liability Partnership always hold greater capacity to borrow from financial institution and other investors.

Greater Credibility

Private Limited Company fetches higher credibility from creditors, suppliers than proprietorship and partnership since various information is available in public domain.

No Mandatory Audits

Statutory audits of LLP are not mandatory like in case of Private Limited Companies. Auditing of books of accounts is not required if LLP has turnover of less than Rs. 40 lakhs or capital contribution of less than Rs. 25 lakhs. This saves cost and efforts of LLPs and its ideal for small businesses or new startups.

Disadvantages


Difficulty in raising investment

Yearly compulsory filing of returns

Increased Compliance Cost

Increased taxes burden

Steps in formation of a Limited Liability Partnership

Get Digital Signature for Designated Partner

Get Designated Partner Identification Number for all Designated Partners.

Reserve name of your choice as per the naming guidelines.

Drafting of LLP Agreement/Deed.

Payment of Fees and Stamp Duty.

Your LLP is now Incorporated.

Annual Compliance for Limited Liability Partnership

Statutory Audit under Limited Liability Partnership Act, 2008

In case turnover exceeds Rs. 40 Lacs and/or capital contribution is more than Rs. 25 Lacs, audit is required to be conducted as per the provisions of Limited Liability Partnership Act, 2008.

Annual Returns under Limited Liability Partnership Act, 2008

Mandatory annual returns are required to be filed with Ministry of Corporate Affairs every year within time limit given from the closure of financial year.
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Income Tax Returns

It is mandatory to file Income Tax Return of the LLP under the Income Tax Act, 1961. If there are carried forward losses, then it is advisable to file Income Tax Return within the due date specified in the Act.
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Income Tax Audit

In case the turnover/receipts exceed the specified limit, then Audit may be required to be conducted under provisions of the Income Tax Act, 1961.

TDS Returns

If payments are made where Tax is required to be deducted at source, then TDS returns are required to be filed quarterly.
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State VAT Act

If registrations are taken under State VAT Act, then specified returns are required to be filed as per the frequency as applicable to the business. Under Maharashtra VAT Act, the frequency of filing business returns could be monthly, quarterly or Half-yearly.
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Service Tax

In case the LLP is providing service and Service tax registration is taken, then Service Tax returns are required to be filed once in six-months. Service Tax payments are required to be done on monthly basis.
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How can we help you in starting up Limited Liability Partnership?


We help you in understanding basic structure of Limited Liability Partnership. We help you in drafting the draft LLP agreement by understanding various clauses. We help you register your LLP with respective Registrar of Companies. We also help you in obtaining mandatory registrations under various Acts depending on the activity of the business.


Limited Liability Partnership can be used for undertaking Manufacturing Activity.

We help you obtain MSME Registration.
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Limited Liability Partnership can be used for undertaking Trading Activity.

We help you obtain State VAT Registration.
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Limited Liability Partnership can be used for providing Services

We help you obtain Service Tax Registration.
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Limited Liability Partnership can secure its Brand Name or Trade name by registering the same.

We help you register Trademark®™.
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Comparison Chart

Comparison chart for choosing Business Organization Form

Limited Liability Partnership
  • Professional Service Providers
  • Moderate Time
  • Yes
  • Yes
  • Less
  • Difficult
Sole Proprietorship  
  • Small trader or Manufacturer
  • Least Time
  • No
  • No
  • Minimal
  • Difficult
  Partnership Firm     
  • Family Business
  • Least Time
  • No
  • No
  • Minimal
  • Difficult
Private Limited Company
  • Start up or Growing Companies
  • Moderate Time
  • Yes
  • Yes
  • High
  • Easy

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