Guide to Limited Liability Partnership

A Limited Liability Partnership or LLP, may be something you’ve heard about if you intend to start a business. An LLP has features from both partnerships and corporations. You will find in this article valuable information about LLPs such as their pros and cons, what is needed legally, tax rules and much more. After reading this article, you will know if a limited liability partnership is the proper business form for you.

What is a Limited Liability Partnership (LLP)

Indian entrepreneurs are choosing Limited Liability Partnership (LLP) more and more often as the preferred way to set up their businesses.The Limited Liability Partnership structure unites critical features from both partnership firms and companies into one entity. Details in its designation show that an LLP represents a partnership structure formed by at least two participants operating under an LLP agreement. Partners of LLPs establish limited participant liability while the entity benefits from perpetual organizational succession like companies.

In the year 2008 India introduced the Limited Liability Partnership (LLP) framework. India's management of LLPs operates through the Limited Liability Partnership Act, 2008. Establishment of LLP involves at least two partners to be incorporated. Despite meeting the LLP requirement, an LLP can maintain its registration without restrictions on the number of partners it accepts. 

Each LLP must designate at least two partners who remain natural persons with one of their members being a resident of India. The designated partners receive their rights and duties through the standard provisions of their LLP agreement. Under LLP Act 2008 in addition to the provisions stated in the LLP agreement, designated partners are supposed to ensure absolute compliance.

Advantages of Limited Liability Partnership

• Separate legal entity : LLP possesses the legal personality, which is similar to that of a company. The member contributors do not affect the structure of the organization of the LLP. The LLP is allowed to be sued and to undergo a legal action in its own name of business. The contracts that the LLP will be signing under the name of the company will help in building trust among the stakeholders and encouraging clients and suppliers to trust the company to do business with them.
• Limited liability of the partners : Some of the members of LLP they bear the financial responsibility not as investors but solely as a result of their investment. The liability of each partner is limited to the amount of capital that he/she donated at the time of forming the partnership. The amount of contribution made by the partners is the utmost liability to them since they are not subjected to the personal liabilities of the business. This leads to the assets of the establishment settling the business liabilities during the period of closure of an LLP where partners are not exposed to unlimited liability. 
• Low cost and less compliance : An LLP's formation expenses remain lower than those of establishing either a public limited company or private limited company. An LLP needs to meet limited compliance obligations. Two necessary annual documents compose the LLP's filings: Annual Return together with Statement of Accounts and Solvency.
• No requirement of minimum capital contribution : It does not have a minimum required capital in the formation of an LLP. Any form of company may incorporate without any minimum paid up capital. Any amount of capital contributed by the partners will make the LLP be formed.

Conclusion

Ultimately, a Limited Liability Partnership registered with the help of LLP consultants offers businesses many perks such as limited liability and almost no restrictions on managing the business. But it is unlikely to meet the needs of businesses that want to issue equity or become listed on a stock exchange. It’s a good idea to seek advice from a lawyer or accountant before launching an LLP to make sure it will work for you. In this way, you’re able to determine which course of action is best for your business going forward.

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