What is a Limited Liability Partnership? | Advantages & Disadvantages

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What is a Limited Liability Partnership

LLP is a corporate business form that provides the benefits of the limited liability of a company and the flexibility of a partnership. The LLP can continue to function despite changes in partners. It can engage in contracts and own property in its name.

The Parliament of India adopted the Limited Liability Partnership Act of 2008 to establish and legally approve the idea of an LLP in India. Unlike conventional partnerships in India, LLPs are separate corporate and legal entities from their partners, with perpetual succession. Any change in the partners of an LLP does not affect the LLP's existence, rights, or liabilities.

An agreement between partners and the LLP governs their reciprocal rights and duties. However, being a separate entity, the LLP is nonetheless accountable for its other obligations. It is classified as a hybrid between a corporation and a partnership since it has elements of both a corporate structure and a partnership business structure. 

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Advantages of LLP

  • LLP is a business model that is organized and operates based on an agreement.
  • LLP offers flexibility without enforcing detailed legal and procedural requirements. 
  • It allows professional and technical expertise and initiative to combine with financial risk, which is taking capacity innovatively and efficiently.
  • LLP is available in countries such as the United States of America, the United Kingdom, Australia, and Singapore.

Disadvantages of LLP

  • LLP registration requires a lot of paperwork because of the separate legal status it holds.
  • LLP has to pay a higher penalty for non-compliance as compared to a private limited company.
  • Two partners are required. One person cannot run the business.
  • Besides the advantage of limited filing, LLP returns are higher even when there are no business or profit margins. Regardless of turnover, they are taxed at 30%.
  • If the LLP contravenes the provision of sub-section 1 of section 7, the LLP and partners will be punished with a fine, which will range from ten thousand rupees to an extended amount of five lakh rupees.

To a detailed document of Applying for LLP Company Registration, check out this blog:

Procedure for LLP

  • File an essential LLP’s annual return with MCA and maintain annual compliances.
  • LLP is essential to creating an annual return based on finances and production of the previous year.
  • Based on the necessary requirements, an annual return must be prepared and sent for confirmation.
  • After the approval, you can submit the annual return along with necessary appendices to the Ministry of Corporate Affairs.

Conclusion

In conclusion, LLP company registration has plenty of advantages and disadvantages, as mentioned in the article. To obtain your limited liability partnership certification, take advantage of the excellent service of JR Compliance. Their expert guidance is all that you need to receive your LLP certificate.