Limited Liability Partnership (LLP) is gaining popularity with its numerous benefits it gives to the entrepreneur. LLP is a business entity which combines the limited liability of a company and the flexibility of a partnership.
There are multiple factors an entrepreneur should consider before choosing the type of business one plans to register. The size and nature of business, fund raising, scale etc should be considered before choosing the type of business entity. Here are some of the reasons why you should register your business as a private limited company.
- There is no minimum capital requirement.
- In an LLP, each partner is not responsible or liable for another partner’s misconduct or negligence
- The cost of formation of an LLP is lower than other business entities such as private limited company or public limited company.
- LLP is a separate legal entity distinct from the partners. LLP can enter into agreements, contracts and it can own property in its name.
- LLP is easy to establish, manage & run. The LLP agreement can be customized to suit the requirement of the promoters provided the provisions contained in the LLP agreement is in compliance with the Limited Liability Partnership Act 2008.
- The maximum number of partners in a partnership firm is 10 in case of banking business and 20 in all other types of business. However, in an LLP, there are no restrictions on maximum number of partners.
- The regulatory compliance for an LLP is relatively less as compared to limited companies. LLPs do not have to hold board meetings, annual general meetings and minutes prepared unless otherwise specified in the LLP agreement.
- The partners have limited liability. The partner’s personal assets are not exposed except in case of fraud.
- Companies registered under The Companies Act, 2013 has to appoint statutory auditor in the first board meeting on the company. However, LLPs do not have to appoint auditors unless the turn over exceeds Rs. 40 Lacs or capital contribution exceeds Rs. 25 Lacs per annum.
- The LLP is free to adopt cash or mercantile basis of accounting with the condition that the method accounting should be regularly followed.
- For tax purposes, the LLP is treated as a partnership firm.