LLP stands for Limited Liability Partnership. It is an alternative corporate business form which offers the benefits of limited liability to the partners at low compliance costs. It also allows the partners to organize their internal structure like a traditional partnership. A limited liability partnership is a legal entity, liable for the full extent of its assets. The liability of the partners, however, is limited. Hence, LLP is a hybrid between a company and a partnership.
But it should not be confused with limited liability company.
Cost: The cost for registration of LLP is normally higher than the cost for registration of a partnership firm.
Authority: LLPs are registered in India under the Ministry of Corporate Affairs, Central Government. Partnership firms are registered with the Registrar of Firms, Controlled by the respective State Government in which the firm is registered.
Limited Liability Protection: The main advantage of a Limited Liability Partnership over a traditional partnership firm is that in a LLP, one partner is not responsible or liable for another partner’s misconduct or negligence. A LLP also provides limited liability protection for the owners from the debts of the LLP. However, unlike private limited company shareholder, the partners of an LLP have the right to manage the business directly.
Number of Partners: LLPs and Partnership Firms must have a minimum of two partners to be registered. Post incorporation, a LLP can have unlimited partners. In case of a Partnership Firm, if the number of partners at any time reduces below the mandatory minimum of 2 due to death, incapacitation or resignation of a Partner, the partnership firm would stand dissolved. On the other hand, in case of a LLP, if the number of Partners reduces below 2, the sole Partner can still find a new Partner to fill the position without dissolution of the LLP.
Difference between LLP & Private Limited Company
Private limited company registration process and the LLP registration process are very similar with some differences in the documents and forms filed for incorporation.
Cost: The cost for registration of LLP is normally lower than the cost for registration of a private limited company.
Flexibility: LLP will have more flexibility as compared to a company.
Compliance: LLP will have lesser compliance requirements as compared to a company
The average time taken to complete an LLP registration is about 15 – 20 working days, subject to government processing time and client document submission.
It is compulsory to make and execute LLP agreement within 30 days of the incorporation of LLP. It defines the roles, responsibilities, rights, and powers of the partners to LLP and to each other. Hence, it creates the foundation for the smooth running of LLP.
The following key registration which LLP should obtain at the time of start of business:-
The LLP will have to file income tax return with income tax department. Also quarterly TDS return needs to be filled if TDS has been deducted on specified payment
The LLP will have to file GST returns with GST department on monthly.
It is necessary for LLP to prepare audited financial statements under LLP Act each year if the turnover exceeds INR 40 Lakhs for the year. However, a tax audit may be necessary based on turnover and other criteria.
LLP Form 11 is due on or before 30th of May each year. Form 11 contains details of the number of partners, total number of partners, total contribution received by all partners, details of body corporate as partners and summary of partners. In addition to LLP Form 11, Form 8 must be filed within 30 days from the end of 6 months of the financial year along with some prescribed fee.
Hence, LLP Form 8 would be due on or before 30th October of each financial year.
We will help you to register the LLP, obtain key registration and also to comply with various legal requirements.