A limited liability partnership registration (LLP) is a partnership in which some or all partners have limited liabilities. It therefore can exhibit elements of partnerships and corporations. In an LLP, each partner is not responsible or liable for another partner’s misconduct or negligence.
- In India, for all purposes of taxation (service tax or any other stipulated tax payment), an LLP is treated like any other partnership firm.
- Liability is limited to each partner’s agreed-upon contribution to the LLP.
- No partner is liable on account of the independent or unauthorized actions of other partners, thus allowing individual partners to be shielded from joint liability created by another partner’s wrongful business decisions or misconduct.
- An LLP shall be a body corporate and a legal entity separate from its partners. It will have perpetual succession. Indian Partnership Act, 1932 shall not apply to LLPs and there shall not be any upper limit on the number of partners in an LLP, unlike an ordinary partnership firm where the maximum number of partners cannot exceed 20.
- The LLP Act has a mandatory requirement that one of the partners in the LLP must be an Indian.
- Provisions have been made for corporate actions like mergers and acquisitions.
- While enabling provisions in respect of winding up and dissolutions of LLPs have been made, detailed provisions in this regard would be provided by way of rules under the Act.
- The Act also provides rules for Limited Partnerships.
- The Registrar of Companies (RoC) shall register and control LLPs too.
BENEFITS OF LIMITED LIABILITY PARTNERSHIP REGISTRATION
- It is more flexible to organize the internal structure of LLP. Comparatively, it is complex to organize the internal structure of a company.
- There is no maximum limit for the number of partners in LLP. In the private limited company, shareholders are limited to the extent of 200 shareholders.
- Raising and utilization of funds depends on the partner’s will. Funds can be bought and utilized only as per the norms listed under the Companies Act, 2013.
- LLP is exempt from Dividend Distribution Tax (DDT). In contrast, a company has to pay DDT on dividend distribution.
- Professionals like Chartered Accountants, Cost Accountants (CMA), Advocates, engineers, and doctors may prefer to register as LLPs.
- No requirement of compulsory audit: All the companies, whether private or public, irrespective of their share capital, are required to get their accounts audited. But in the case of LLP, there is no such mandatory requirement.
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