Limited Liability Partnership Company and its benefits

A Limited Liability Partnership (LLP) is a unique form of legally recognized body, which assimilates the features of – the limited corporations and the traditional partnership firms. As it is known to be a hybrid Combination with features of a company and a partnership firm, a LLP is highly recommended for small to medium-sized business enterprises.

This form of business is governed by the Limited Liability Partnership Act, 2008. This act was introduced on 1st April 2008 with the main idea of promoting MSME (Micro, small and medium enterprises). Looking at the multiple benefits that LLPs had to offer, gradually the rage was seen to spread across the startup community as well. Below mentioned are few benefits that an LLP has to offer –

• Unlike in a partnership firm where the liability of partners is unlimited, an LLP offers limited liability to the extent of the contribution made by the partners.
• If an LLP with a capital of Rs. 25 Lakhs and annual turnover less than 40 lakhs, audit is not a compulsory process for such LLPs.
• When compared to registration processes and incorporation Government fee of a partnership firm, the fee is significantly lower for an LLP. For a partnership firm, IndiaFilings charges a net Rs.16,000 whereas for an LLP it is as lower as just Rs. 8000 all inclusive.
• The incorporation process of an LLP requires very little documents and the process of registering is also less cumbersome when compared to other forms of companies.
• An LLP is not liable to pay any tax on dividend distribution whereas a Partnership is liable to pay a 15% tax as part of the dividend distribution tax.
• An LLP is entitled to a separate legal entity just like a company, but when compared to the annual compliances of a company, an LLP has very few compliances to be adhered by. In an LLP there are no compulsory board meetings nor is there any compulsion for annual general meetings.

Despite all these benefits of an LLP over other forms of companies, the Limited Liability Partnership Act, 2008 does not have any provision for converting LLP into a private limited company. However, the Ministry of Corporate Affairs website states that an enabling provision would be made when Companies Act is revised. In the amended Companies Act, 2013, LLP finds a place among all other business entities that can be registered and become a Company.

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