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Limited Liability Partnership (LLP)

A limited liability partnership is a type of company that enables the partners to handle their internal affairs in accordance with an agreement reached by both parties, much like in the case of a partnership firm

Introduction

LLP- Limited Liability Partnership

A limited liability partnership is a type of company that enables the partners to handle their internal affairs in accordance with an agreement reached by both parties, much like in the case of a partnership firm. However, in an LLP, no partner is accountable for the autonomous or unapproved conduct of other partners, safeguarding the private assets of each member. An LLP must have a minimum of two partners, but there is no limitation for the number of partners. The idea of a Limited Liabilities Partnership was announced in 2008 through the Limited Liability Partnership (LLP) Act.

What is liability?

Liability is, to put it simply, something that a person or business owes, typically a monetary amount. A liability exists when you are in debt to an individual or company or any other entity after making a promise to pay them in the future. Essentially, an unpaid debt

Advantages of LLP :

  • Low cost and less compliance: Compared to other business arrangements, incorporating an LLP is less expensive. Low levels of compliance are also seen by LLP. The LLP is only required to file two statements yearly: an Annual Return and a Statement of Accounts and Solvency.
  • Limited responsibility of partners: The partners' obligation is just for the contributions they have made. This means that they are only accountable for the amount of donations they made and are not personally responsible for any business losses. If the LLP chooses to wind up, only its assets are responsible for paying off its debts.
  • No minimum capital: There is no requirement for a minimum capital commitment from partners, therefore the LLP can be founded without one.
  • Limited liability partnerships are considered to be different legal entities. This indicates that LLPs have the ability to hold assets and take on debt in their own names. They are able to sign contracts, bring legal action, and be sued on their own behalf.

Liability is something that a person or business owes, typically a monetary amount

A limited liability partnership is a type of company that enables the partners to handle their internal affairs in accordance with an agreement reached by both parties, much like in the case of a partnership firm.

The advantages of LLP are many but below we have mentioned the four significant advantages of LLP i.e. firstly, LLP can be registered by paying a very small amount as the cost of the registration process, is budget-friendly, secondly, it needs less compliance, thirdly the responsibilities of partners are limited, and fourthly that partners do not need much capital to start LLP.

The disadvantages of LLP are as follows:

The LLP has a High-income tax rate compared to other business types which are similar in nature.

In the LLP business, there is no equity investment as individual partners can get the shares only.

The most significant disadvantage that one should remember is that in LLP there is a penalty for non-compliance which increases the more it gets delayed.

The process for the registration of an LLP is as stated below:

  1. Obtain Digital Signature Certificate (DSC)
  2. Apply for Designated Partner Identification Number (DPIN)
  3. Name Approval
  4. Incorporation of LLP

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