A Guide to Limited Liability Partnership | Unilex
A limited liability partnership is a partnership which gives limited personal liabilities to the members. This legal entity can be an accountant firm, dentists, solicitors, dentists, veterinary practice, medical practitioners, and other professional service firms.
The introduction of this legal entity in 2001. This business entity offers limited liabilities to its members. Which means, in the event of loss, partners are not personally responsible for business debt and liabilities.
Basic Features of Limited Liability Partnerships:
• This business entity comes with less complication so it is for the partners to set up and maintain.
• Huge money is not required to start a limited liability partnership.
• There is no restriction on maximum partners to incorporate this firm.
• An LLP is not liable to pay any tax on the income earned by it and share of its partners.
• Dividend Distribution tax is levied on the company when the owners of the company withdraw the profit shares.
• If you are an undischarged bankrupt you are not eligible for becoming an LLP member.
•The penalties are potentially unlimited and any individual may be ordered to make such contribution.
• Every LLP must affix its name on the outside of the office or place of business (even if it is a member’s home).
• LLP is required to submit financial information like annual records, annual accounts, and details of any mortgage charges to the company house.
• The Central government has authority and power to investigate LLP, if required, by appointment of competent inspector for the purpose.
• LLP has to pay corporation tax on all profits.
• Must maintain a PSC register.
• There are no shares, shareholders, and directors in the LLP.
• Must be set up a for-profit business, not for a non-profit organization.
Difference between limited liability partnerships:
Both legal business entities share certain similarities that are listed below.
• Both LPP and traditional business are set up by two or more people for the purpose of making a profit.
• The internal management structure of both entities is similar.
• Each partner is taxed as a self-employed individual, rather than the business is taxed as a whole.
However, they also differ in a number of ways that are listed below:
• In the event, if the LLP business entity faces loss, the LLP members are only liable for what they invest or they fine to pay the debt.
• LLP business entity incorporates at a higher level. So the credibility and image are only renowned.
• LLP are subjected to strict terms and conditions. This brings authenticity and transparency in the business. And make more appealing than other business entity.
When to choose LLP?
An LLP is one of the effective and profitable alternatives for the partners that currently operate a traditional business. With a small amount of investment and a minimum of 2 members, you can operate this entity effortlessly. Though it is simpler to a general partnership, it doesn’t take full responsibility for partnership liabilities. Moreover, an LLP is not liable to pay tax on the income earned by it and share of its partners. Furthermore, the flexibility offered from the partnership structure is often the determining factor for a certain profession.
I understand, start-up face dilemma, whether to choose LLP or limited company. If your budget is low to open a company then LPP is perfect for you. Incorporating LLP is more cost-effective than private limited. As a minimum statutory fee Rs. 60,000 of private limited, whereas that of LLP is Rs. 800 respectively.
Along with that if you choose private limited the minimum capital required to open a business is 1 lakh. Where there is no minimum specified limit in case of LLP. The LLP partners have a great deal of freedom in determining how the LLP will be managed. As they have a liability to divide their duties on the basis of experience, expertise and personal interest. To avoid ambiguity, it is vital to make an agreement, which spells out the role of each partner in the business.
Process of Limited Liability Partnerships Registration:
Following are the steps of Limited Liability Partnerships Registration.
• Digital Signature: This is the first step in which directors of the LLP have to fill an application form for digital signature.
• Digital Identification Number: After applying for digital signature, now they have to apply for a digital identification number.
• Name Approval: Once you applied for digital signature and digital identification number you to provide two names of companies at MCA portal
• Incorporation for LLP: Form-2 is the application for the incorporation of the LLP.
• File Limited Liability Partnership Agreement: LLP agreement is filled in Form-3 on the MCA portal.
Documents are required for Limited Liability Partnerships Registration:
• PAN card/ Electricity bill/ ID proofs of partners.
• Address proof of the partners.
• Residents proof of the partners.
• Foreign Nationals partners have to submit passports as proof.
Documents of LLP:
• Proof of registered office address.
• Digital signature certificate.
Benefits of Limited Liability Partnership:
• One of the topmost benefits of limited liability partnership protects the member's personal assets from the liabilities of the business. LLP’s has a separate legal entity to the members.
• The distribution of profits and the operation of the partners are very flexible and easy.
• The LLP is deemed to be a legal person, it can buy, rent, lease, own and enter into a contract and held be accountable if required.
• You can protect the partnership name by registering the LLP at companies house you prevent another partnership or company from registering the same name.
• An LLP can register with any name its member choose as long as it is available at the company house.
Hope you now understand the features, role, and benefits of the Limited Liability Partnership registration. If you want to register the LLP and looking for the best advisory consultant who can help you in the Limited Liability Partnership, you have come to the right place. At, Unilex Consultant we can help you in regarding LLP registration.