Your email address will not be published.
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.
1. LLP is regulated by Limited Liability Partnership Act, 2008.
2. 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.
3. 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.
4. 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.
5. Registration is required to be done with Ministry of Corporate Affairs.
6. Process of incorporation is similar to Private Limited Company
1. Get Digital Signature for Designated Partner.
2. Get Designated Partner Identification Number for all Designated Partners
3. Reserve name of your choice as per the naming guidelines.
4. Drafting of LLP Agreement/Deed.
5. Payment of Fees and Stamp Duty.
6. Filing of Incorporation Forms.
7. Your LLP is now Incorporated!
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.
Private Limited Company has got separate legal existence than its owners unlike in case of
proprietorship and partnership where business and owners are the same.
Company Business not affected by the death of the owners i.e. shareholders.
Company continues to exists till the time it is wound up as per the provisions of the Law.
In today’s era more and more capital is required to run and scale up the business activity.
Private Limited Company always hold greater capacity to borrow from financial institution and other investors.
Private Limited Company fetches higher credibility from creditors, suppliers than proprietorship
and partnership since various information is available in public domain.
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.
Mandatory statutory audit is required to be conducted by the appointed Statutory Auditor as per the provisions of the Companies Act, 2013.
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.
It is mandatory to file Income Tax Return of the Company 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.
Further, if the turnover exceeds the specified limit, then Tax Audit may be required to be conducted under provisions of the Income Tax Act, 1961.
If payments are made where Tax is required to be deducted at source, then TDS returns are required to be filed quarterly.
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.
In case the Company 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.
Comparison chart for choosing Business Organization Form