Limited liability partnerships are most of the time referred to by its acronym as the LLP. LLPs were first brought into place in 2000 under the partnership act 2000 to offer partnerships with the limited liability formerly only available to the companies. Before registering your company as LLP, you should be aware of some of the legal compliances and tax liabilities. If your business turnover exceeds the threshold limit of GST (goods and services tax), then you have to file GST returns online compulsorily. It is equally important to carry out the Limited Liability Partnership registration process to avail of all the benefits.
The formation of a limited liability partnership is well-known when a ‘professional partnership’ would like to get the benefits from the protected liability. Such type of arrangement is specifically suitable for solicitors, accountants, consultants, architects, surveyors and experts from the other fields where a partnership is favoured to a limited company. The limited liability partnership could be appropriate when the associates are members of an institution or earning individuals when they are plainly defined and not merely added to the partnership and distributed by the dividend. Within the formation of limited liability, partnership members’ earning is perceived as a personal income.
– Benefits that LLP offers.
There are a plethora of benefits that one can avail from trading by an LLP;
-LLP (limited liability partnership) safeguards the members’ personal assets from the liability of the business as LLPs are wholly separate and individual legal entities to the members.
– Partnership operations and dispensation of profit are governed by the written agreement betwixt the partnership members. This might provide better flexibility in the management of the whole business.
– The LLP (limited liability partnership) is considered as a legal person. It can rent, purchase, lease, possess property, make contracts, recruit staff, and be held accountable if the need arises.
– LLPs are allowed to appoint two companies as members of the LLP. In an LTD company, at least one director has to be a real person.
– Designated and non-designated members, one can operate the LLP with a distinct level of membership.
– Safeguarding the partnership name, registering the LLP (limited liability partnership) with companies house one can prevent another company registration in India bearing the same name.
– Disadvantages of the LLP.
In all the forms of the business, you will find certain advantages and disadvantages. The following are the disadvantages of the LLP;\
– One of the primary disadvantages of the LLP (limited liability partnership) is public disclosure. Financial accounts will have to be filed to companies’ houses for public record. These accounts might reveal the real income of the LLP partnership members, which they might not want to reveal in the public domain.
– Income of the partners would be personal income and hence, would be taxed as well. There might be tax benefits in registering as a company, but this would rely on your personal preferences and circumstances.
– Profit can be kept in the same manner as a company limited through shares. To put it simply, all the earned profit will be efficiently dispensed with no flexibility to hold over profit to a future tax year.
– An LLP (limited liability partnership) is obliged to have at least two members. If one member of the partnership chooses to quit then, the LLP might have to dissolve itself.
– Since the beginning, residential addresses are recorded at companies’ houses. While the use of ‘service addresses’ now enables name addresses to be kept out of the public’s gaze, any formerly supplied address to companies house is still part of the public record until and unless you want it to be kept secret by paying monetarily. Many businesses do not consider it a problem. Nonetheless, there are some cases where this might not aspire. Consider partners and solicitors of the law firms that might not want their home addresses in the public domain if their work is related to some sensitive cases.
LLP (limited liability partnership) is considered easier to set up in comparison to other business forms. It offers smooth functioning of the day-to-day operations with more minor compliance requirements and costs to set up. You should also consider various factors before choosing the business form for your company, such as tax liability, legal compliance, flexibility in the operations, management requirement, needs of accounting and auditing, tax benefits, and suitability of the business.
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