A limited liability partnership (LLP) is a corporate arrangement that, along with some possible tax cuts and other benefits, offers some liability insurance for its members. A Limited Liability Partnership combines the advantages of a partnership with the benefits of a corporation. It is a system most widely used for people who go into practice together, such as doctors, lawyers, and accountants.
A Limited Liability Partnership is a type of partnership that limits liability for partners more than some other partnerships do. This form of partnership was introduced in April 2009 in India and it is governed by the limited liability partnership act of 2008.
The structure of this partnership is such that it is a body corporate, a legal entity separate from its partners and it has perpetual succession.
Advantages of a Limited Liability Partnership:
In a Limited Liability Partnership, the income tax is treated the same as if in a Partnership firm. Hence, distribution from LLPs to its partners isn’t taxed. The company's credits and deductions are passed to partners to file on their tax returns. The percentage of individual interest each partner has in the business is divided by credits and deductions. This may be useful for partners who, due to their interests in other companies, have a small stake in the company or special tax requirements.
Each participant is personally responsible for the company's acts in general partnerships. This covers mortgages, obligations, and other partners' wrongful actions. The liability protection it affords is one advantage of a limited liability company. This form of relationship arrangement excludes individual partners from personal blame for the negligent conduct of the LLP's other partners.
Furthermore, individual partners are not directly liable for the debts of relationships or other commitments. Where future litigation or allegations of wrongdoing against the corporation are involved, this is beneficial for an individual partner.
Limited liability agreements provide stability in company ownership for members. Partners have the power to determine if they are going to relate to corporate processes personally. Based on the expertise of each partner, management roles may be split evenly or segregated.
LLP can be initiated with a minimum sum of money for capital. Capital can take the form of physical, mobile assets such as property, equipment, or intangible assets. In India, the capital requirement for a private company is 1 Lakh and for a Public company, it is 5 Lakhs thus a Limited Liability Partnership is favorable.
The only requirement is that there should be two partners to start the limited liability partnership but there is no upper limit for the same.
Limited Liability Partnerships unlike other forms of companies do not require to audit their books in compulsion. The exception to this is when the contributions of the LLP exceeds Rs. 25 Lakhs, or if the annual turnover of the LLP exceeds Rs. 40 Lakhs.
These benefits as mentioned above are what makes a Limited Liability Partnership an attractive and viable option for professional business.
This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being.
