LLP
LLP is viewed as an alternative corporate business vehicle that provides the benefits of limited liability like that of company but allows its members the flexibility of organizing their internal structure as a partnership based on a mutually arrived agreement.
Key Attributes
| Limited Liability:- | Personal liability of the members is limited |
|---|---|
| Separate Legal Entity:- | LLP is a separate legal entity from its shareholders and directors. |
| Duration/ Uninterrupted existence:- | A company has ‘perpetual succession’, that is continued or uninterrupted existence until it is legally dissolved |
| Flexibility:- | Operation of the partnership and distribution of profits is determined by written agreement between the members. This may allow for greater flexibility in the management of the business. |
| No minimum capital requirement:- | LLP can be started with the minimum amount of capital money. Capital may be in the form of tangible, movable asset like Land, machinery or intangible form |
| No limit on owners of business:- | LLP may have partners varying from 2 to many. There is no limit for partners in LLP. |
| Fund Raising:- | Funds are to be brought by partners only as public funding is not allowed in LLP |
Advantages of LLP:
- personal liability of the partners is limited
- separate legal entity from its partners.
- continued or uninterrupted existence until it is legally dissolved
- can be formed with no minimum capital and two partners with no limit on maximum number of partners
Disadvantages of LLP:
- funds are to be brought by partners only as public funding is not allowed in LLP
- if a partner wants to transfer his/her ownership rights then he/she has to obtain the consent of all the partners.
- penalty for Non-Compliance becomes very high if default is continued
- lack of secrecy as documents are filed and available publicly
Procedural Aspects
- Choose and apply name of the LLP
- Submit requisite forms & documents with ROC to obtain Certificate of Incorporation
- File LLP Agreement with ROC to complete the registration process
- Open a bank account
- Apply for registrations like GST, IEC, Startup, MSME etc
