Limited Liability Partnership (LLP) in India governs by Limited Liability Partnership Act 2008. LLP is just like traditional partnership firms with added advantage like Limited liability of its partners. LLP is a new concept while Partnership is an old concept.
Advantages of LLP include both the advantages of Partnership as well as a Company as it has the ingredients of both of them. Some of advantages are described below:-
- Limited Liability of Partners: – Liability of partners in case of Partnership firm is unlimited however in case of LLP it is limited to their contribution in LLP.
- LLP data availability online:- MCA allows availability of Documents to Public except the Agreement between Partners. Also, one can see the last Balance sheet filed with MCA in the Master data of the entity which creates high creditability and reliability among the other parties to the LLP. However Any of the information or the data of the Partnership are not disclosed on public platform.
- Easy in Compliance as compare to Company: – Govt has mandated some strict restriction on Companies on raising funds, on loans & advances etc. In that case it causes undue hardships to companies in doing business. However most of these restrictions are not applicable on LLP. As well as LLP do not require to hold any meeting on regular intervals of their partners as legally required in case of Company.
- Audit:-Company need to get their books of Account audited by Chartered Accountant irrespective of their turnover, even in case of no business. However LLP are exempted for audit till certain turnover. In that case they can save cost of compliance.
- No restriction on maximum nos of Partners:- LLP can have any Nos of partners with no upper limit subject to minimum of two. However Private Limited Company restricts the maximum nos to 200. It causes undue hardship in case of big business deals.
- Renowned form of business: Though the concept of Limited Liability Partnership has been recently introduced in India but it is very known concept in other countries of the world especially in service sector. LLP concept is renowned form of business in India as well.
- Easy to Form: It is very easy to form LLP, as the process is very simple as compared to Companies and does not involve much formality.
- Perpetual Succession: An incorporated LLP has perpetual succession. Notwithstanding any changes in the partners of the LLP, the LLP will be a same entity with the same privileges, immunities, estates and possessions. The LLP shall continue to exist till its wound up in accordance with the provisions of the relevant law.
- Body Corporate: Just like a Company, LLP is also body corporate , which means it has its own existence as compared to partnership. LLP and its Partners are distinct entity in the eyes of law. LLP will know by its own name and not the name of its partners.
- Easy Transferable Ownership: It is easy to become a Partner or leave the LLP or otherwise it is easier to transfer the ownership in accordance with the terms of the LLP Agreement.
- Separate Property: A LLP as legal entity is capable of owning its funds and other properties. The LLP is the real person in which all the property is vested and by which it is controlled, managed and disposed off. The property of LLP is not the property of its partners. Therefore partners cannot make any claim on the property in case of any dispute among themselves.
- Raising Money: Financing a small business like sole proprietorship or partnership can be difficult at times. A LLP being a regulated entity like company can attract finance from PE Investors, financial institutions etc.
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