The Limited Liability Partnership (LLP) combines the benefits of limited liability and partnership flexibility. Established by the Limited Liability Partnership Act of 2009 in India, it is an ideal structure for small and medium enterprises due to its simple incorporation process. An LLP requires at least two partners, with no maximum limit, and individual partners are not liable for each other’s misconduct. Partners’ rights and responsibilities are outlined in an internal agreement. However, LLPs cannot issue equity shares, limiting their ability to raise funds from investors.
BENEFITS OF LLP :
Before choosing between a Limited Liability Partnership (LLP), Private Limited Company, Partnership Firm, or Proprietorship Business, it is essential to understand your proposed business model. An LLP is unsuitable for businesses seeking equity funding from Angel Investors, Venture Capitalists, or Private Equity but offers superior protection of personal assets compared to proprietorships or partnerships in the event of bankruptcy.
Separate Legal Entity :A Limited Liability Partnership (LLP) is an independent business entity with perpetual succession, meaning it continues despite changes in partnership. As a recognized juristic person, an LLP can independently own or acquire property.
Simplicity: Establishing and operating an LLP is simpler and more straightforward than a Private Limited Company. There is no minimum capital requirement, and ownership transfer is easy.
Suitable for Small Business: LLPs with annual turnover under ₹40 lakh and capital under ₹25 lakh are exempt from formal audits, making them ideal for small businesses and startups. Compliance requirements are also less stringent compared to a Private Limited Company.
KEY BENEFITS OF LIMITED LIABILITY PARTNERSHIP FIRM (LLP)
Enhanced Market Image and Credibility: Limited Liability Partnerships (LLPs) are generally favored by corporate clients, vendors, and government agencies over sole proprietorships and traditional partnerships.
Centralized Registration Advantage: LLPs are centrally registered with the Ministry of Corporate Affairs, facilitating branch openings and bank account operations nationwide, unlike state-registered partnership firms.
Limited Liability Protection: LLP partners enjoy limited liability for business debts, safeguarding personal assets in cases of bankruptcy.
