Limited Liability Partnership (LLP) is a new corporate structure that combines the advantages of the limited liability of a company with the flexibility of a partnership. The set up as well as the compliance costs are low when compared to that of a limited company. LLP is now emerging as a new alternative corporate business vehicle that provides the benefit of limited liability of a company, but allows its members the flexibility of organising their internal management on the basis of mutually arrived agreement, as in partnership firms.
Advantages of an LLP
- It is a body corporate and has a legal entity as separate from its partners.
- The liability of the partners is Limited.
- It has perpetual succession / existence, irrespective of the changes in the Designated partners.
- It has more flexibility and lesser compliance requirements as compared to that of a limited company.
- The procedure for registration of an LLP is simple, with lesser costs.
- Conversion of existing business to LLP is possible, and does not involve complicated processes and procedures.
- An LLP enjoys relaxed audit requirements. The Act provides that any LLP, whose turnover does not exceed, in any financial year, forty lakh rupees, or whose contribution does not exceed twenty five lakh rupees, is not required to get its accounts audited.
Steps in an LLP Formation
The various steps in the formation of an LLP are summarised below
- Acquire Digital Signature Certificate (DSC) and apply for Designated Partner Idenitification Number (DPIN).
- Apply for a suitable name for the LLP. While selecting the name, ensure that it satisfies the Name Guidelines.
- Once the name is approved, file the LLP Registration Documents, to incorporate the LLP.
- File the Initial LLP Agreement within 30 days of the incorporation of the LLP.
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