Limited Liability Partnership has become a preferred form of organisation for start-up companies. This is because it incorporates the benefits of a company and a partnership firm into a single form of organisation.
Individuals willing to form an LLP must know its features, benefits, taxation, and eligibility requirements, among other factors.
If you are willing to learn about them all, keep reading.
The full form of LLP is Limited Liability Partnership. This is a type of company in which all or specific partners have finite liabilities. This means that any one partner is not responsible or answerable for another partner's negligence in an LLP company. Limited liability means that creditors cannot go after a partner's asset or income if the partnership fails.
Any person who wants to become a designated LLP company partner must have a Designated Partner Identification Number (DPIN). Plus, one of the partners must be a resident of India to form a Limited Liability Partnership company.
The partner should possess Digital Signature Certificate, Director identification number (DIN), along with the LLP agreement. The minimum authorised capital required to form an LLP company is ₹1 lakh.
Several unique features characterise an LLP company. Following are some of the unique features of a Limited Liability Partnership –
Contrary to a general partnership, LLP companies can continue to operate even after the death, retirement, insolvency or withdrawal concerning any one partner. The company can still own property rights and attest to contracts in its name.
A Limited Liability Partnership company is a separate legal entity like any other entity, company, or corporation.
An LLP company is turned into an artificial legal person to address several legal aspects. A legal procedure is conducted, following which an LLP has all the rights of a person.
An LLP company can have a common seal according to Section 14(c) of the Limited Liability Partnership Act 2008. However, the company should make sure that an eligible authority has custody of the seal.
A minimum of two partners and two individuals as designated partners must be present in an LLP. Out of the two partners, one partner must be an Indian resident. However, an LLP does not specify any maximum partner numbers.
The Central Government of India is the only entity that can investigate all matters and disputes concerning LLP firms.
An LLP has to carry on lawful business intending to earn returns from the profit. It cannot be formed for charitable and non-profit purposes.
Any start-up, unlisted company, or private firm can turn into an LLP firm, according to The Limited Liability Partnership Act.
There are many benefits of LLP. Some of which include–
An LLP has to pay tax at a flat rate of 10% of its total income. However, when the total income exceeds one crore rupees, the income tax shall further rise by a surcharge at the rate of 10% of the tax.
Amount of income tax and the applicable surcharge shall further increase by education cess and secondary and higher education cess. It will be calculated at the rate of 4% of such income tax and surcharge.
Countries like the U.K, U.S.A, Australia and Germany have accepted the LLP concept. This concept is a great relief to professionals like Company Secretaries, Chartered Accountants, Advocates and others.
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