Business

What are some key notable elements of the LLP

Introduction.

LLP is the most dominant option apart from other corporate business form in India, that offers the benefits of the company’s limited liability and the partnership’s flexibility. LLP (limited liability partnership) enterprise is a worldwide recognised form of business organisation. It has been introduced in India by enacting the limited liability partnership act, 2008, which was notified on 31st of March, 2009. It becomes crucial to carry out the online LLP registration process in India.

LLP is a partnership in which some or all partnership (relying on the jurisdiction) have limited liabilities. That’s why it can exhibit components of partnerships and corporations. As per section 3 of the LLP act, 2008, the online LLP registration in India make it a body corporate and incorporated under the act. It is a legal entity separate from its partners.

Meaning.

The LLP, as it is famously known as a limited liability partnership, conjoins the advantages of both partnership and company into a single form of organisation. LLP is a new corporate form that allows professional knowledge and entrepreneurial skill to combine, operate and organise proficiently and innovatively.

It offers an alternative option to the traditional partnership firm with unlimited liability. By incorporating the LLP, its members can get the benefits of the limited liability and flexibility of organising their internal management based on mutually arrived agreement, as is the case in the partnership firm.

Every LLP (limited liability partnership) is obliged to have at least two designated partners who shall be individuals, and at least one of them has to be an Indian resident. In limited liability partnership all the associates are body corporate or one or more than one partners are person and body corporate, at least two individuals who are partners of such LLP or nominees of such body corporate must act as the designated partners.

Characteristics of the LLP (limited liability partnership).

Body corporate – the LLP is a legal entity separate from its partners.

Continuous succession – unlike the partnership firm, the LLP can continue its existence even after the insanity, retirement, insolvency or even demise of one or more partners. Also, it can enter make contracts and hold property in its name.

Separate legal entity – the LLP is a separate legal entity. Also, it is wholly liable for its assets. The liability of the partners is finite to their contribution to the LLP. Thus, the limited liability partnership (LLP) creditors are not the creditors of individual partners.

Mutual agency – There are many benefits of choosing LLP over partnership firm with where unorganised or independent actions of one partner do not make the other partners liable. All the partners are the LLP’s agents, and one partner’s actions do not bind to the others.

Artificial legal person – for all lawful purposes, the LLP (limited liability partnership) is an artificial legal person. It is created by the legal process and possesses all the rights of an individual. It is intangible, invisible, and immortal but not fictitious as it exists.

Limited liability – as per section 26 of the said Act, every partner is the LLP’s agent for the objective of the entity’s business. Nonetheless, he/she is not an agent of the other partners. Also, the liability of each partner is finite to his/her share or contribution in the LLP.

Maximum and minimum number of partners – every LLP should have at least two partners that are necessary and at least two individuals as designated partners, where one of them has to be an Indian resident. You will not find any limit on on the number of maximum partners in the LLP.

Business for the profit only – the LLP is not allowed to be set up for charitable or non-profit purposes. The entity must be formed to conduct a lawful business to make a profit.

Here are some of the lesser-known advantages of the LLP (limited liability partnership) in India.

– There is no requirement for minimum contribution by partners.

– There is no limit on the owners of the business.

– Registration cost is nominal.

– There is no requirement for the mandatory audit as well in the LLP.

– There are multiple relaxations when it comes to taxation aspects also in the LLP.

– DDT (dividend distribution tax) is also not applicable on the LLP.

– LLP provides more flexibility compared to other forms.

– LLP can appoint two companies as members of the LLP in the corporate ownership.

– It has different levels of membership via designate and non-designate members.

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button