Below are the 8 benefits of registering a Limited Liability Partnership (LLP), this form of business provides entrepreneurs best of both Partnership and Company business forms. Thanks to Partnership Act of 2008, for introducing this to India.
No single partner is responsible for the negligence or misconduct of another partner; this means that every partner will have a form of limited liability. Therefore, the personal liability of an individual partner arising from omissions, errors, negligence or incompetence limited to cash/kind contributions made by that partner.
Reasonable Formation Costs
One of the advantages of forming an LLP is the cost involved. The cost of incorporating an LLP is lesser compared to a private or public company.
Relaxed statutory compliances
The statutory compliance is much relaxed compared to a Private Limited Company, which makes it easier for entrepreneurs to concentrate on their business rather than on compliance formalities.
Relaxed auditing norms
LLP auditing norms are relaxed compared to Private Limited companies. Limited Liability Partnership Firm is not legally required to audit their books unless its turnover is beyond Rs. 40 lakhs.
No Minimum Capital Contribution Norms:
There are no specific requirements for the minimum capital contribution by partners. The minimum contribution in case of Public Company is Rs. 5 lakhs and in a case of Private Company is Rs. 1 lakh, this mandatory requirement does not apply to an LLP.
Any number of registered partners
There is no limit to the maximum number of partners in an LLP, as in the case of Private concern, where the number of members should be not more than 200. This helps in a division of liabilities, wherein each partner has to carry a limited burden. Public companies can also be partners in an LLP.
Relaxed Government Regulations
A Private Company has to deal with a lot of Government interventions and regulations. From forming a company to maintaining records, to holding meetings, a Private Company needs to follow certain rules. But this is not the case in an LLP, as there is minimal compliances and Government intervention.
Simple to dissolve or wind-up:
The winding up or dissolution of an LLP is easier as compared to a Public Company or Partnership Firm due to fewer procedures involved. There are two ways to dissolve an LLP i.e. voluntarily and by a tribunal (Order of National Company Law Tribunal).
Given below is an infographic reflecting benefits of registering an LLP.