Limited Liability Partnership (LLP)

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Limited Liability Partnership (LLP)

As per LLP act 2000, limited liability partnership is a hybrid form of business entity which is neither considered as partnership firm nor a company. It is a separate legal entity distinct from, its members and enjoys the benefit of limited liability. LLP is formed on the basis of private agreement between the LLP members. It does not contain shareholders or directors and is taxed like a partnership firm.

It operates in the same way as ordinary partnership firm operates. Ordinary partnership firm does not register with company’s house whereas registration of LLP is a statutory requirement. Each LLP must have at least 2 members who are responsible for administrative duties such as dealing with accounting & taxation matters on behalf of LLP. Members can either be individual or a corporate body.There is no maximum limit to the number of members in an LLP.

Minimum Requirements to set up an LLP

• Unique LLP name
• Minimum of 2 members details
• Minimum of 2 designated members details
• Statement of Compliance
• Registered office address
• Details about key peoples i.e. PSC’s (People with significant control)

Benefits of LLP

The Benefits of LLP are as follows –

1. In order to settle the partnership debts, partner’s personal assets can be seized in the case of ordinary partnership firm but LLP has a legal entity separate from its members and enjoys the benefit of limited liability.
2. As a separate legal entity, LLP can enter into any contract in its own name which avoids the problem of signing of certain documents by each & every partner like we do in case of ordinary partnership firm.
3. LLP enjoys the benefit of perpetual succession and cannot be dissolved upon the resignation, bankruptcy or death of a member.
4. LLP has a flexible structure which depends upon the terms mentioned in the LLP agreement whereas limited company is strictly governed by articles of association.
5. LLP shares the management responsibilities and bring wide range of skills & experiences to the enterprise and does not depend entirely on the resources of one person.
6. After incorporating as LLP, you can avail various tax benefits which will help you in reducing your tax liability.