The Limited Liability Partnership structure of incorporating was introduced in 2009 in India. Putting together, the advantages of a private limited company and a normal partnership, LLP is the most desirable corporate body structure, emerging companies and entrepreneurs are opting for.
The main advantages of a LLP company in India are as follows –
1. Lesser cost of incorporation.
2. Unlike partnership firms, the partners have limited liability towards the company, which means, they are liable to the loss of damage related to the company to the ratio of extent of their contributions in the LLP or as otherwise stated in the LLP agreement.
3. Just like an other form of company, LLP is also a Body Corporate, which means, it has its own existence as compared to partnership. LLP and its Partners are distinct entity in the eyes of law. LLP will be known and considered by its own name and not the name of any of its partners.
4. LLP has perpetual succession. Even if there are changes in the partners and positions inside the company, an LLP continues to maintain its legal entity unperturbed, until it is officially winded up in accordance of the law.
5. LLP is eligible to own and manage separate assets or properties in its own name, and partners cannot make a claim on a LLP’s property in case of a dispute, because according to the LLP Act of 2008, the property under the name of the LLP is not the property of its partners.
6. Transferring ownership or rights to partnership in a LLP is easier. A partner can join or transfer his rights to another member easily in accordance to the terms mentioned in the LLP agreement of a company.
7. LLP being a legal entity in the eyes of law, can sue in its name or be sued by others. The partners of the LLP are not liable directly in such a case, where there are charges of financial dues against the LLP. However, a partner can be held responsible if legal investigation indicates a criminal or legal offence on a partner’s side.
8. Legal charges against an LLP is not a charge against its partners, as both are separate identities in the eyes of law.
9. A partner of a LLP is not responsible for any act or legal offence committed by another partner of the LLP.
10. As compared to a Pvt. Ltd., the number of compliance are lesser for a LLP.
11. Annual Auditing by a Chartered Accountant is not mandatory unless annual turnover exceeds 40 lakhs or contribution exceeds 25 lakhs. Preparing a mandatory balance sheet is enough for growing LLP companies.
12. LLP company is not subject of Dividend Distribution Tax, which implies that there is not tax while distributing profits to the partners of a LLP.