Company Law

Benefits to Incorporate an LLP in India for MSME’s

If you have chosen LLP for running your business? But don’t know what the actual benefits of forming LLP in India are. First of all, let’s understand in detail important things about LLP.

LLP means a type of legal entity where some or all partners have limited liability. There are different business types in India, the main difference between LLP and Traditional Partnership is that –

In Limited Liability, Partnership partners are not responsible for one other’s misconduct or negligence. Limited Liability Partnership combines the limited liability of the company and the flexibility of the Partnership with limited compliance costs.

Have you confused about whether your business is suited for LLP or not?
So, Which Type of business should choose LLP?

LLP is useful for small to large enterprises in general but particularly for service-based Industries or sector involving professionals such as web designers, architects, chartered accountants, for example, which doesn’t require equity funding to run their business.

Limited Liability Partnership (LLP) is one of the easiest forms of registration. It can be formed easily as compared to Private Limited or Public Limited Companies which doesn’t require holding board meetings or record minutes.

Since Limited Liability Partnership (LLP) is liable for the debts run up while running the business rather than individual partners in the firm, hence LLP is preferred only for profit-making business.

However, keep in mind in case you need to raise the funds for your business then registering for LLP is not a good option. Instead, Forming a Private Limited Company or OPC is preferable.

Minimum Requirements to Form Limited Liability Partnership (LLP) in India

The Minimum Requirements to form LLP in India are as follows:

• Minimum 2 Partners (Partner may be an individual or a body corporate)
• Minimum 2 Designated Partners who are individuals and not less than one of them should be resident in India.
• Digital Signature Certificate of Designated Partners
• Name of LLP.
• Agreement LLP
• Registered Office of LLP

Benefits of Registering LLP in India
• It is a Separate Legal Entity as a company.
As a separate entity, you as a third person or a partner, have the power and right to take legal action against LLP but not on partners. LLP can sue others and can be sued by others. And one partner is not responsible for misconduct or negligence or any other fraudulent conduct of another partner.
Having a Continuous Existence
As Limited Liability Partnership act as a separate legal person incorporated by law, in case of death of any partners, LLP existence remains unaffected. An LLP is not affected even after changes in ownership. Partners are come and go but LLP remains always in existence until the dissolution of LLP by law.
• Minimum Compliances
An LLP requires minimum compliances. Therefore LLPs are ideal for start-ups
and small businesses (MSMEs) that are just starting their operations and want to have minimal regulatory compliance related formalities.
• Transferability of Ownership
The ownership of an LLP can be easily transferred to another person by inducting them as a Designated Partner of the LLP.
• Owning Property
A Limited Liability Partnership is an artificial judicial person, can acquire, own, and sell, property in its name. No Partner can make any claim upon the property of the LLP so long as the LLP is in existence, they can make claim on the property of LLP in case of wind up to the extent of their share.
• Easy to dissolve
You can easily Wind up LLP as compared to a Private or public limited company. Winding up of an LLP may take close to 2 – 3 month which is less compared to winding up of Private or public limited company.
 

TaxClue Team

Taxclue is an online news portal for reporting all news, articles, judgments, Circulars, orders, and notifications relating to various corporate and tax laws in India. We use the tagline ‘Simplifying Laws’. Our mission is to Simplify the Laws and make people aware of their rights and duties in relation to tax matters in order to equip them to participate in nation-building. TaxClue is a team of young professionals. We started in December 2016 with the mission of knowledge sharing. TaxClue would like to hear your valuable suggestion. Please write to our editorial team at info@taxclue.in

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