EnglishLimited Liability Partnership (LLP) has become a preferred form of organization among entrepreneurs as it incorporates the benefits of both partnership firm and company into a single form of organisation.
The concept of the Limited Liability Partnership (LLP) was introduced in India in 2008. An LLP has the characteristics of both the partnership firm and the company. The Limited liability Partnership Act, of 2008 regulates LLPs in India. A minimum of two partners are required to incorporate an LLP. However, there is no upper limit on the maximum number of partners of an LLP.
Among the partners, there should be a minimum of two designated partners who shall be individuals, and at least one of them should be a resident of India. The rights and duties of designated partners are governed by the LLP agreement. They are directly responsible for compliance with all the provisions of the LLP Act, 2008 and provisions specified in the LLP agreement.
The Advantages of a Limited Liability Partnership are given below:-
Separate legal entity
An LLP has a separate legal entity, just like companies. The LLP is distinct from its partners. An LLP can sue and be sued in its own name. The contracts are signed in the name of the LLP, which helps to gain the trust of various stakeholders and gives the customers and suppliers a sense of confidence in the business.
Limited liability of the partners
The partners of the LLP have limited liability. The liability of the partners is limited to the contributions made by them. This means that they are liable to pay only the amount of contributions made by them and are not personally liable for any loss in the business. If an LLP becomes insolvent at the time of winding up, only the LLP assets are liable for clearing its debts. The partners have no personal liabilities, and thus they are free to operate as credible businessmen.
Low cost and less compliance
The cost of forming an LLP is low compared to the cost of incorporating a public or private limited company. The compliances to be followed by the LLP is also low. The LLP needs to file only two statements annually, i.e. Annual Return and a Statement of Accounts and Solvency.
No requirement for minimum capital contribution
The LLP can be formed without any minimum capital. There is no requirement of having a minimum paid-up capital before going for incorporation. It can be formed with any amount of capital contributed by the partners.
Click to incorporate a Limited Liability Partnership.
