The advantages of LLP in India are much as it is a newly growing business structure. LLP is a new concept while Partnership is an old concept. LLP and Partnership are different as Partnership is an old concept while LLP is a newly established concept introduced in India by Limited Liability Partnership Act, 2008.

Advantages of LLP includes both the advantages of Partnership as well as a Company asit have the ingredients of both of them.

The advantages of LLP  (Limited Liability Partnership) are:

1. Convenient

It is easy to start and manage a business like entrepreneurs. LLP agreements are customized in according to meet the needs of partners concerned. There is fewer formalities in areas of legal compilation, annual meeting, resolution as compared to any other Private Limited Company. For a detailed comparison between LLP and Private Limited read Choosing between LLP and Private Limited.

2. No minimum capital requirement

LLP can be started with the minimum amount of capital money. Capital may be in the form of tangible, movable asset like Land, machinery or intangible form.  Capital requirement in the case of a Private company( Requirements for Registration of a Private Company)  and Public Company(Requirements for registration of a Public Company) is Rs. 1, 00,000 and Rs. 5,00,000 respectively whereas no such mandatory capital requirement specified under the LLP.

3. No limit on owners of business

LLP may have partners varying from 2 to many. There is no limit for partners in LLP. An LLP requires a minimum 2 partners while there is no limit on the maximum number of partners in contrast to a private company wherein there is a restriction of not having more than 200 members.

4. Lower Registration Cost

The cost of registration of LLP is low as compared to any other company (Public or Private). Read a Cost Comparison of LLP, OPC, private limited, partnership, proprietorship.

5. No requirement of compulsory Audit

LLPs are not required to audit the accounts. Any other company (Public, Private) are mandated to get their accounts audited by the auditing firm. LLP is required to audit their account in the following situation:

  • When the contributions of the LLP exceeds Rs. 25 Lakhs, or
  • When annual turnover of the LLP exceeds Rs. 40 Lakhs

6. Savings from lower compliance burden

LLP have to face less compliance burden as they have to submit only two statements i.e. the Annual Return & Statement of Accounts and Solvency. Whereas in the case of private company, at Least 8 to 10 regulatory formalities and compliances are required to be duly completed. Read Annual Cost Comparison of Private Limited and LLP.

7. Taxation Aspect on LLP

LLP is not liable to pay the tax on the income and share of its partner. Thus, no dividend distribution tax is payable as under section 40(b).  Bonus, commission or remuneration, Interest to partners, any payment of salary, allowed as deduction.  Provision of ‘deemed dividend’ under income tax law, is not applicable to LLP.

8. (DDT) not applicable

If the partners of LLP withdraw profits from the company, an additional tax liability in the form of DDT is not payable by partners. Whereas, in the case of a company, the owners have to pay DDT @ 15% ( surcharge & educational cess). Hence, profit of LLP is in the hands of its partners can be easily withdrawn by the partners.

After reading the advantages of LLP, if you may want to register one, LegalRaasta can help you with LLP Registration in India @ just Rs 7,999/ (all inclusive fee).