Limited
Liability Partnerships, LLP is a unique and new form of business
that combines the advantages of both 'Company' and 'Partnership' in a single
business entity. This business form was introduced in India in the Year 2008
with the approval of the Limited Liability Partnership Act, 2008.
LLP is a superior form to partnership. The partnership is
often discouraged to use because of its unlimited liability feature, i.e. your
personal assets may also be held up in case all the dues are not cleared.
Hence, it is very risky to use this form of business. So, to overcome this
problem, a most important feature of limited liability of company is added to
the partnership, which results in Limited Liability Partnership.
LLP is a separate entity, which can be formed in India by a
minimum of two persons coming together with a motive of earning profit. Unlike
a Private Limited Company, an LLP is easy to manage. It is
subjected to minimal post registration compliances.
Some of the demerits of an LLP are, one doesn’t have the
option of generating equity in an LLP which decreases the chances of raising
funds from the investors in case of a start up, as investors are mostly
expected to take up some percentage of the profit shares from the company.
Although, if a start up is not keen on raising funds and wants
less stress on the compliances filing part, then they can opt for LLP type of
partnership.
An LLP in India has following features:
-Liability of Partners in LLP is
limited to their capital contribution.
-Less compliance is needed as compared to a Public Company.
-Flexibility in business operation because partners can decide
how they will individual contribute to the business operations.
-Now, LLP can access to foreign equity funds under the
automatic route. No RBI approval is required.
-No tax is levied on a distribution of profits amongst the
partners.
-No restrictions on a maximum number of partners.
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