Limited Liability Partnership (LLP): All you Need to Know
What is LLP?
LLP (limited liability partnership) is considered as a partnership in which a few or all company partners have limited liability. LLP is a legal entity separate from its partners. In this blog post, we are going to discuss characteristics, advantages and how to register a LLP firm. So, let's start!
What are the Characteristics of Limited Liability Partnership?
- LLP provides your business a legal entity.
- LLP requires less money to set up in comparison to other business forms including private limited company and public limited company.
- Every partner in a LLP Company is liable to the business according to their contribution.
- Limited liability partnership companies provide plenty of flexibility in terms of tax treatment. You have to file your LLC taxes or go for LLP Annual Filing as a sole proprietorship or as a partnership.
- There are minimal regulations and compliances to be followed.
- For running a LLP firm, minimum capital contribution is needed.
If you are planning to start a limited liability partnership firm, then there must be two members at least for the incorporation but there is no limit for the number of partners. One of the two or even more partners have to be resident of India and an LLP agreement is being made to describe the roles performed by the company partners. Limited liability partnership is registered under the LLP act 2008.
Advantages of LLP (limited liability Partnership)?
There are several advantages of a limited liability partnership firm and we have mentioned some of the key ones below.
No need of Minimum Capital Requirements
There is non requirement of minimum contribution in LLP. Limited liability partnership firms can be formed with the least capital amount.
No Limit on Partners and Owners
LLP needs a minimum of two partners and there is no limit on the maximum number of partners.
No Need of Audit
All organizations including private and public limited companies are needed to get their business accounts audited. However, in case of limited liability partnership, there is no need for compulsory audit.
LLP Registration Cost is Less
LLP is exempted from different taxes including dividend distribution tax. The rate of tax on LLP is less than the company.
Some other advantages of a Limited Liability Company include one can form a LLP company with just one member, LLP owners are protected against the business liabilities of the firm, business operations of a LLP company are managed by the managing members as there is no board of directors in the company. LLP companies need little bookkeeping.
But, there are some drawbacks to a limited liability partnership company but as it relates to home business or small business owners they are so insignificant they are not worth mentioning. LLP is a small business owner's dream and gives the protection of corporations and maintains the simplicity of a partnership. You will have more time to focus on vital details of your business including sales and marketing.
How to Register your Limited Liability Partnership Firm?
There are some steps which you need to follow to register a LLP firm.
Step 1: Obtain the Digital Signature Certificate (DSC)?
When you are filling an LLP Registration application, then you have to attach your digital signature certificate to the form. Apart from this, you have to attach the digital signature of all your partners in the company. Thus, all the partners should procure their DSC from government Certified agencies. Remember, the price of these certificates will vary according to service providers.
Besides, class 2 and 3 category digital signature certificates must be obtained, so you can proceed to obtain DPIN for partners. Get the DIN for all the designated partners of the company. The application should be made in form DIR 3 for DPIN and DIN. You can attach DIPN and DIN along with the LLP incorporation form.
Step 2: Now Go for Name Approval Filing
You have to get a unique name for your LLP that should not match with any existing names. You have to file an application with LLP reserve unique name for the name Approval that lets you propose 2 names. The Ministry of corporate affairs site provides a free name search facility that helps in finding similar names related to your suggested names. You also have to file a form for incorporation of LLP with the registrar who works in the same state where your firm is.
Step 3: LLP Agreement
Remember, LLP agreement refers to the rules and regulations as well as roles performed by every partner in the company. You can fill the agreement online in form 3 which is available on the website of the ministry of corporate affairs. Once the LLP firm is incorporated, you have to fill the form 3 within 30 days.
How to Share Profits in a LLP Firm?
The prime aim of every LLP firm is to make and share the profits. If there is no particular agreement for profit sharing, then the profit must be shared equally among the business partners. For example- If there are three partners in the business and the business earns a profit of Rs.30,000. In this case, they can share the profits equally that is Rs.10,000.
If you are planning to register a company, then it becomes easy with ExpertBells, a leading company registration service provider in Delhi. We provide proper attention to their clients and make it easy to get their LLP registrationin India. No matter whether you want to set up a business in Delhi, Bangalore, Agra or any other place in India, Our team of professionals will help you, right from start documentation and company formation to LLP Annual Filing in Delhi. Everything will be processed easily with ExpertBells.