A Limited Liability Partnership (LLP) is a partnership in which some or all partners (depending on the jurisdiction) have limited liabilities. It therefore exhibits elements of partnerships and corporations. In an LLP, one partner is not responsible or liable for another partner’s misconduct or negligence.
The Limited Liability Partnership Act, 2008 was published in the official gazette of India 9, 2009 and has been notified with effect from 31st March, 2009 However, the Act, has been notified with limited sections only. The rules have been notified in the official gazeette on April1,2009. The first LLP was incorporated in the first week of April1,2009.
LLPs also have many advantages over proprietorships, partnerships and limited companies, as elaborated below.
1) Limited Liability:
LLP clearly mention in its name ‘Limited Liability Partnership.’ It only extends to the contribution given by partners.
2) No Audit Requirements:
Audit is not required unless capital exceeding Rs. 25 lakh or turnover exceeding Rs. 60 lakh.
3) Legal Entity/Status or Recognition:
An LLP is a legal entity, a juristic person established under the Act. It has its existence separate from its partners.
LLPs are taxed like general partnership firms. LLPs pay an effective tax of 30.9%. They are exempted from 10% surcharge. LLPs tax payment is lower than that of companies, which pay a 33.99% tax on profits.
5) Other Important Advantages:
• Low cost of Formation and compliances.
• Less requirements as to maintenance of statutory records
• Renowned and accepted form of business worldwide
• No requirement of any minimum capital contribution
• No restrictions as to maximum number of partners
• Body corporate can be a partner of an LLP
• Less Government Intervention
• Easy to dissolve or wind-up