A Limited Liability Partnership is a corporate business vehicle that enables entrepreneurial initiative to operate in flexible and efficient manner by providing the benefits of limited liability and allowing its members to organize their internal structure as a partnership. LLP form of business is ideal for all classes of entrepreneurs whether it be traders, manufacturers or professionals. It is easy to incorporate and manage. LLP is more credible and preferable than a normal partnership firm.
Limited Liability Partnership has been introduced in India by way of Limited Liability Partnership Act, 2008. It exhibits elements of both partnership and corporation. In LLP, one partner is not responsible or liable for another partner’s misconduct or negligence unlike a traditional partnership in which each partner has joint and several liabilities.
Minimum Requirements for LLP Registration
- Minimum 2 Partners
- No Capital Requirement
- At least one Designated Partner as Indian Resident
- DPIN for all Partners
An LLP is a legal entity and a juristic person. It has wide legal capacity and can own property.
LLP is easy to manage and statutory audit is not required for Limited Liability Partnership. LLP is most ideal for small enterprises. Tax Audit is also not required for LLPs with capital less than Rs. 25 lac and turnover not exceeding Rs. 40 lac.
LLP continues to exist beyond the existence of its Partners. This is not possible in traditional partnership firms.
LLP is a popular and well known business structure in the world. Corporate Customers, Vendors and Govt. Agencies prefer to deal with LLP instead of proprietorship or normal partnerships.
Many times startups need to borrow money and take things on credit. In case of normal Partnerships, Partners personal savings and property would be at risk incase business is not able to repay its loans. In an LLP, only investment to start a business is lost, personal assets of the Partners are safe.
A person at the same time can be a Partner, creditor, supplier and also an employee of the LLP.