Limited Liability Partnership Firm

Future of Limited Liability Partnership LLP in India

calendar09 Apr, 2024
timeReading Time: 4 Minutes
Future of Limited Liability Partnership LLP in India

Let us know more about Opportunities for LLPs in India.

What is a Limited Liability Partnership?

The Limited Liability Partnership Act,2008 governs Limited Liability Partnerships or LLP. An LLP is a corporate legal entity where the partners have limited liability for the company’s obligations. Their assets are protected from business and company liabilities. The LLP in India allows for greater flexibility and autonomy, at the same time protecting personal liability on the part of the partners or shareholders of the Liability Limited Partnership. This structure allows for a limited number of members who have greater control over the affairs of the business. There are many opportunities for LLPs in India.

What are the requirements for forming an LLP in India?

  • At least two designated partners are the basic requirement for forming an LLP in India, as per the LLP Act, 2008.
  • There is no requirement for a minimum paid-up share capital of an LLP.
  • One of the most significant features of an LLP is that each partner is required to contribute an amount towards the LLP.
  • The liability of each partner of the LLP is in proportion to their contribution or shareholding in the LLP.
  • Members or Partners can limit the liability of their assets from any losses or penalties incurred by the LLP in due course of its business.
  • LLP, hence, safeguards the members from excessive liability towards the company.

Benefits of forming LLP in India

The benefits of forming an LLP in India are:

  • Low or no minimum paid-up capital required

LLP registration in India requires no or low capital contribution from its members. There are very few capital infusion requirements for forming an LLP in India.

  • It can be formed with very few members

An LLP does not have a maximum limit on the number of directors or partners to be incorporated as a business. There is a requirement to have a maximum of2 designated directors or partners to incorporate an LLP in India, with no maximum limit on the number of members.

  • Low Registration Cost

LLP in India enjoy the benefits of less registration cost as compared to Companies. Also, the Government has reduced the price of Trademark Registration for small enterprises, including limited Liability Partnerships.

  • Easy to receive FDI

The recent Foreign Exchange Rules or FEMA has notified up to 100% Foreign Direct Investment in LLP, without any government approval. Earlier only Companies enjoyed this incentive, however, now Limited Liability Partnerships too can accept Foreign Direct Investment under the Automatic Route.

  • Greater Control and Flexibility

Since LLP in India are closely held and administered entities, the partners and directors enjoy greater autonomy and control over the affairs of the company. Limited Liability Partnerships

  • No Personal Liability of the Partners

The Partners of a Limited Liability Partnerships are not liable to pay for the losses or liabilities of the company from their personal assets. The partners are liable only up to the extent of their capital contribution towards tot the LLP or as mutually decided and laid down in the LLP deed.

  • No mandatory annual audit requirement

Every corporate entity has to undergo an audit of its books of accounts to ensure compliance with the statutory reporting requirement under the applicable laws of the country. However, LLP, under the LLP Act, 2008, is exempted from mandatory audit requirements that have an annual turnover of more than Rs. 40 lakhs or capital contribution exceeding Rs. 25 lakhs in a financial year.

Future of LLPs in India

LLPs are highly versatile, easy to set up/wind up, and operate corporate entities that impose limited liability upon the partners or directors of the LLP. The advent of the start-up incubation ecosystem in India has ushered in endless possibilities for hybrid entities like LLPs to be preferred as ideal business structures by angel investors and Venture Capitalists. LLP offers attractive tax benefits and waivers from compliances required by companies and start-ups. LLPs are included explicitly in the list of entities not bound by sectoral caps while receiving foreign investment under the recent FEMA Regulations.

Furthermore, LLPs give benefits to professionals such as doctors, lawyers, accountants, and consultants to work in collaboration with industry experts and integrate their services to boost operational efficiency and market outreach. They can partner with industry experts to expand their practice and explore new business avenues. Also, since LLPs as a business structure are very transparent and uniformly controlled, the possibilities of fraud and internal conflict or mismanagement become minimal. As a result of this, the investors and stakeholders show confidence in the LLPs, which also enable them to invest liberally. LLPs foster digital development and promote the proliferation of emerging technologies such as cloud computing, virtual accounting and management systems, etc. In the broader picture, LLPs help solve numerous social issues such as employment generation, tech enablement of traditional industries, globalization of small and localized businesses, and boost to overall contribution to the national economy. LLP in India has a developing future. The LLP in India will achieve more success in the coming years.

Conclusion

Considering the gradual shift in preference of businesses towards smaller, more streamlined, and easy-to-operate business structures, the future of LLP in India is very promising and bright. The process of LLP registration in India has been greatly simplified and made inexpensive to encourage individuals and smaller businesses to consolidate as Limited Liability Partnerships. The process of incorporating LLP in India has been digitized and streamlined, along with other business entities. The Centralized Filing System of the MCA ensures that the applicant can apply for and obtain a certificate of incorporation for their LLP without any hassle.

At Corpbiz, our primary task is to simplify things for you. Our specialized incorporation and filing services would ensure complete compliance solutions for LLP Formation. Our cost-efficient and quick-response services ensure you get the best of our services and have a satisfying professional experience. Contact our customer outreach executive today to learn more about our services.

Frequently Asked Questions (FAQs)

  1. What is a Limited Liability Partnership?

    Limited Liability Partnership or LLP is a corporate legal entity, the partners here have limited liability towards the obligations of the company. Their personal assets are protected from liability of the business and company liabilities. The LLP Business structure allows for greater flexibility and autonomy, at the same time protecting personal liability on the part of the partners or shareholders of the Liability Limited Partnership.

  2. What are the minimum requirements required to form an LLP?

    The minimum requirement required to form an LLP is that there should be at least 2 designated partners, one of whom should be an Indian resident. As per the minimum paid-up capital is concerned, there is no minimum paid-up capital required to form an LLP.

  3. What benefits does LLP offer to business owners in India?

    LLP in India offers a wide variety to business owners, such as tax benefits, ease of FDI infusion, enhanced business opportunities, greater control and flexibility over business affairs, easy to incorporate, and wind -up.

  4. What documents are required to incorporate an LLP in India?

    The documents required to incorporate an LLP in India are LLP Deed, ID and photographs and the designated partner, along with passport and address proof, rent/lease agreement or ownership proof of the designated premises of the LLP, and DSC of all the Designated Partners.

  5. What regulatory benefits does LLP enjoy over Companies and One Person Companies?

    Opposed to Companies, Limited Liability Partnerships are exempted from the annual internal audit process if their annual turnover is less than Rs. 40 lakhs or capital contribution does not exceed Rs 25 lakhs in a financial year.

  6. What is the Liability of the Partners of an LLP towards a company's losses?

    The Designated partners of an LLP are not entirely liable for the loss of damages incurred to the firm. They are only liable for their capital contribution to the firm as stated in the LLP Deed.

  7. What service does Corpbiz provide about Limited Liability Partnership Formation in India?

    Corpbiz can streamline and consolidate the formalities of LLP formation in India. Our specialized incorporation and filing services would ensure complete compliance solutions for LLP Formation. Our cost-efficient and quick-response services ensure you get the best of our services and have a satisfying professional experience.

  8. Is it safe to invest in LLP in India?

    As LLPs have a limited liability concept, it is comparatively safe to invest in LLPs.

  9. Which is a good LLP or private limited company?

    When looking for a more flexible option, LLP is an excellent option to choose.

Read Our Article: How suitable is LLP for entrepreneurs in India?

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