Limited liability partnership is a combination of the two partnerships and corporate entities. It’s the feature of both these forms. Because the name suggests partners have limited liability within the company which suggests that personal assets of the partners aren’t used for paying off the debts of the company. These days it’s become a highly regarded sort of business as several entrepreneurs are opting for this. There are a variety of partners within the firm and hence they’re not liable or responsible for others’ misconduct. Every one is answerable for their own acts. All liability partnership is ruled underneath the liability partnership act of 2008. However, in India, a limited liability partnership was introduced in April 2009. It is a separate legal entity distinct from its owners. It will enter into a contract and acquire property in its name. Limited liability partnership type is not simply prevailing in India. It’s conjointly seen in countries just like the UK, Australia, etc.
Why an LLP?
Professionals who use LLPs tend to rely heavily on the name. Most LLPs are created and managed by a bunch of professionals who have plenty of experience and clients between them. By pooling resources, the partners lower the costs of doing business whereas increasing the LLP’s capability for growth. they’ll share workplace area, workers so on. most vital, reducing costs allows the partners to appreciate more profits from their activities than they may one by one.
The partners in an LLP may additionally have a variety of junior partners within the firm UN agency work for them within the hopes of sometime creating a full partner. These junior partners area unit paid a wage and sometimes haven’t any stake or liability within the partnership. The necessary purpose is that they’re selected professionals qualified to try to do the work that the partners bring in. this is often otherwise that LLPs facilitate the partners to scale their operations. Junior partners and workers deduct the detail work and unlock the partners to target conveyance in new business.
The privilege of limited liability partnership
- Easy to form- formation of limited liability partnership is an easy process. It is not complicated and time consuming like the process of a company.
- Liability- the partners of the limited liability partnership is having limited liability which means partners are not liable to pay the debts of the company from their personal assets. No partner is responsible for any other partner misbehaves or misconduct.
- Perpetual succession- the life of the limited liability partnership is not affected by the death, retirement, or financial condition of the partner. The limited liability partnership can get out of breath up solely as per provisions of the act of 2008. Management of the company- all the decisions and numerous management activities are seen and done by the directors of the company. Shareholders receive terribly less power as compared to the board of directors. Easy transferability of ownership- there’s no restriction upon joining and leaving the limited liability partnership.
- Easy transferability of ownership- there is no restriction upon joining and leaving the limited liability partnership. It is easy to admit as a partner and to leave the firm or to easily transfer the ownership of others.
- Taxation- yes, it is the benefit of limited liability partnership. Limited liability partnership is exempted from various taxes such as dividend distribution tax and minimum alternative tax. The amount of tax on limited liability partnership is less than as compared to the other forms of company.
- No compulsory audit required- every business has to appoint an auditor for checking the internal management of the company and its accounts. However, in the case of a limited liability partnership, there is no mandatory audit required. The audit is required only in those cases where the turnover of the company exceeds Rs 40 lakhs and where the contribution exceeds Rs 25 lakhs.