For a long time, a need has been felt to provide for a business format that would combine the flexibility of a partnership and the advantages of limited liability of a company with less legal compliance. The Limited Liability Partnership format is an alternative corporate business vehicle that provides the benefits of limited liability of a company but allows its members the flexibility of organizing their internal management on the basis of a mutually arrived agreement, as is the case in a partnership firm.
A law to allow “Limited Liability Partnership” (LLP) in India has been enacted by the Parliament of India in the year of 2008. The Act was named the Limited Liability Partnership (LLP) Act of 2008.
Suitable for whom?
This format would be quite useful for small and medium enterprises in general and for the enterprises in the services sector in particular. Internationally, LLPs are the preferred vehicle of business particularly for the service industry or for activities involving professionals.
Renowned form of business: Though the concept of Limited Liability Partnership has been recently introduced in India it is a very known concept in other countries of the world especially in the service sector.
Flexible to operate: LLP Act 2008 gives LLP the most freedom to manage its own affairs. A partner can decide the way they want to run and manage the LLP, in form of an LLP Agreement. The LLP Act does not regulate the LLP to large extent rather than allows partners the liberty to manage it as per their will.
No minimum capital requirement: LLP can be started with the minimum amount of capital money. Capital may be in the form of tangible, movable assets like Land, machinery, or intangible form. The capital requirement in the case of a Private Company( Requirements for Registration of a Private Company) and Public Company(Requirements for registration of a Public Company) is Rs. 1, 00,000 and Rs. 5,00,000 respectively whereas no such mandatory capital requirement specified under the LLP.
No limit on owners of business: LLP may have partners varying from 2 to many. There is no limit for partners in LLP. An LLP requires a minimum of 2 partners while there is no limit on the maximum number of partners in contrast to a private company wherein there is a restriction of not having more than 200 members.
No requirement of compulsory Audit: LLPs are not required to audit the accounts. Any other company (Public, Private) are mandated to get their accounts audited by the auditing firm.
LLP is required to audit their account in the following situation: When the contributions of the LLP exceeds Rs. 25 Lakhs, or When the annual turnover of the LLP exceeds Rs. 40 Lakhs Limited liability protects the member’s personal assets from the liabilities of the business. LLP’s are a separate legal entity to the members.
Minimum requirement: The minimum number of partners to incorporate an LLP is 2. Among the partners, there should be a minimum of two designated partners who shall be individuals, and at least one of them should be residents in India. Unlike Private Limited, there is no minimum authorized capital requirement for an LLP. The company should hold an Office space within Indian territory.
Step 1: Obtaining DSC And DPIN
Step 2: Application For Name Approval
Step 3: LLP Agreement
Step 4: LLP Incorporation Certificate
Step 5: Apply For PAN & TAN & Bank Account
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