After introduction of Limited Liability Partnership Act, 2008, entrepreneurs have started opting for Limited Liability Partnership (LLP) as their preferred business entity. LLP's are easier to set up and the compliance requirements are much lower than that of a Private Limited Company or a Public Limited Company.
In this article we will discuss advantages of LLP and reasons to choose LLP as preferred type of business.
Lower Cost LLP Registration in India
As compared to Private Limited Company or Public Limited Company, cost of incorporation of a Limited Liability Partnership (LLP) is lower. A Limited Liability Partnership (LLP) can be incorporated for as low as Rs. 7999 with the help of MyEfilings.com, including cost of DIN, DSC, Government fees for capital contribution upto Rs. 1 lakh, PAN Application and taxes.
LLP is required to file only two things namely, filing of Annual Return & Statement of Accounts and Solvency every year. There are no other compliance for LLP unlike Private Limited Company or a Public Limited Company.
Unlike Private Limited Company or Public Limited Company, there is no compulsory audit requirement for Limited Liability Partnership. Audit is only required if the turnover of LLP exceeds Rs. 40 lakhs or the contribution exceeds Rs. 25 lakhs.
Maximum limit of Partners in LLP's
In case of a Private Limited Company, there can be maximum 200 share holders. There is no such limit for a Limited Liability Partnership. A Limited Liability Partnership can have as many partners as it wants. Minimum number of partners in a Limited Liability Partnership should be 2.
Limited Liability Partnership (LLP) is assessed as Partnership Firm by the Income Tax Act, 1961. Therefore it can pay interest on Partners’ Capital, salary to Partners, commission or bonus to Partners etc. The profit distributed to Partners is not taxable in the hands of Partners. There is nothing like Dividend Distribution Tax in case of LLP.