What is a Limited Liability Partnership or LLP’s?

Investors are increasingly choosing the hybrid structure known as the limited liability partnership (LLP), which combines the advantages of both a partnership and a corporation. A legal LLP agreement creates a business structure. This LLP agreement specifies who will be the designated partner and the roles assigned to each partner. LLPs are sometimes described as a hybrid of partnerships and corporations.

Features of a Limited Liability Partnership (LLP):

•  The partner’s liability is limited to the shares purchased. This corporation has no joint liability.
•   LLPs are subject to fewer compliance requirements than other types of businesses. If compliance costs are reduced, expenses are also reduced.
•   The individual must sign an agreement to establish this business, and no further governing documents are required. The partners in this form of business are the only owners and assume full managerial responsibility.
•  A Limited Liability Partnership (LLP) is a good option if you want to start a new company with your partners but don’t want to deal with as many regulations. LLPs have less compliance and more liabilities than other companies.

Limited Liability Partnership (LLP) Registration Process

The registration procedure is as follows:

• Obtain a Digital Signature Certificate

• Apply a Director Identification Number (DIN)

• Approval of the Name

• LLP incorporation

• Submit LLP Agreement

1. To register LLP, the Designated Partners must first apply for a digital signature because all documentation is uploaded online and must be signed digitally.

2. The following step is to collect the Directors Identification Numbers for all of the LLP’s directors.

3. After logging onto the MCA’s official website, two proposed LLP names may be submitted for approval, handled by the Central Registration Certificate.

4. The following documents are required for the incorporation of a Limited Liability Partnership:

•  For Partners:  Photocopies of your PAN card, proof of address, proof of residence, photo, and passport.
•  For the LLP: Proof of address or utility bill, a photocopy of the rental agreement, and a      no-objection certificate obtained from the landlord.

The Benefits of a Limited Liability Partnership:

•  Partners’ assets cannot be removed or seized to satisfy partnership debts and liabilities in an LLP. Each partner’s liability is limited.
•  Because an LLP is a distinct legal entity, business contracts are made in the LLP’s name and do not require signatures from all partners.  
•  In an LLP, the entire operations does not dissolve upon the death, financial crisis, or resignation of another one of the partners.
•  LLP has no minimum capital contribution requirement. It is readily registered with the minimum capital.
•  The number of members in an LLP is unlimited, just like in a corporation.
•  In a limited liability partnership,      partners’ responsibilities are flexible. Each partner has a personal right to govern the business as part of the agreement.
•  Dividend distribution tax (DDT) does not apply to LLP because it adheres to principles of pass-through taxation. As a result, the company is not subject to double taxation, and each partner has to pay personal taxes.

Conclusion

The LLP concept is a hybrid of Partnership, and it benefits both small and medium-sized businesses. Each participant is accountable for their activities. Additionally, it is referred to as an “alternative corporate business vehicle” since its activity is similar to a general partnership but has a specific provision under the limited liability rule.