LLP Complete Form: LLP stands for Limited Liability Partnership. An LLP is a combination of a traditional partnership, and some features of a company are similar to a traditional partnership. LLP registration, the main reason why it was developed is that it is simple and easy to design Maintenance. It also helps owners limit their responsibilities. This is the biggest advantage of a limited liability partnership over a traditional partnership.
Incorporating an LLP company has both the limited liability facilities of a private limited company and the flexibility of partnership pay. No partner is liable for the unauthorized actions of other partners, thus protecting individual partners from joint liability created by the misconduct of the other partner. The organization’s LLP form is usually chosen by professionals, micro and small businesses that are family owned or held closely.
The LLP registration process is the easiest and most transparent process as it contains the name of the company’s partner and partnership fee, the company’s limited liability facility and the flexibility of the partnership fee. The LLP registration process is not long, as you can file your inclusion form online. The online LLP registration process saves you a lot of time and energy.
Requirements for LLP registration:
A) Partners
To register a Limited Liability Partnership (LLP), there must be at least two partners. An individual or body can be a partner of a corporate LLP. An individual partner, who is an Indian citizen, should have a permanent account number (PEN) allotted by the Income Tax Department.
B) Designated partners
Also, LLPs must have at least two ‘designated partners’ who are individuals. At least one of them should live in India. That is, not less than 182 in India in the previous calendar year. Proposed directors must have a Director Identification Number (DIN) issued by the Ministry of Corporate Affairs. LLP partners will be an individual. Where corporate body is one of the LLP partners, it will nominate the person as its nominated partner.
C) LLP name
The name of the Limited Liability Partnership (LLP) will end with the words “Limited Liability Partnership” abbreviated to “LLP”. The name LLP has three parts, namely, ‘name’, ‘activity’ and the words ‘limited liability partnership’ or short name ‘LLP’. The LLP name proposed by the Registrar of Companies must be approved
D) Registered .Face address
The LLP must have an office fee address registered as its legal communication. Address proof with no-ejection budget letter is also required from the address owner for the use of the address as the registration office of the LLP.
E) LLP objects
The LLP’s proposed budget refers to the proposed business activities. LLPs can have any legitimate legal activities. It is advisable to identify the main objects of LLP in a specific line of business. The name of the LLP must correspond to the main budget. If the name of the LLP does not describe a specific describing object, the LLP may contain multifaceted ted objects.
F) Digital Signature Certificate (DSC)
All documents are file online at Registrar Companies. Filing of documents online using a digital signature certificate of the Director obtained from the Certifying Authority in India.
G) Professional certification
Certificates and declarations require for the services of Company Secretary, Chartered Accountant, and Cost Accountant are require to establish a Limited Liability Partnership (LLP).
Advantage LLP registration:
The following are the benefits of including LLP in India:
No minimum contribution required
Then, there is no minimum capital requirement in an LLP. LLPs can be form with the least possible capital. Moreover, the partner’s contribution may include tangible, movable or immovable or intangible assets or other benefits of the LLP.
There are no restrictions on business owners
LLPs require a minimum of 2 partners while there is no limit to the maximum number of partners. This is against a private limited company which is prohibit from having more than 200 members.
Low registration costs
The cost of registering an LLP is lower than the cost of incorporating a private limited or public limited company. However, the difference in the cost of registering LLP vs Private Limited Company has decreased in recent days.
Mandatory audit is not required
All companies, whether private or public, regardless of their share capital, are require to have their accounts debit. In the case of LLP, there is no mandatory requirement. This is suppose to be a significant compliance benefit. A limited liability partnership is require to conduct a tax audit debt only if: –
The contribution of LLP is Rs. 25 lakh, or
The annual turnover of LLP is Rs. 40 lakhs
Aspects of taxation on LLP
Additionally, For income tax purposes, the LLP’s partnership is consider equal to the payroll. Thus, the LLP is responsible for the payment of income tax and is not liable for the share tax of its partners in the LLP. Thus no dividend distribution tax is payable. The provision for payment of ‘Deemed Dividend’ under the Income Tax Act does not apply to LLPs. Section (0 (b)): Any payment of interest, salary, bonus, commission or remuneration to the partners is allow.
Dividend Distribution Tax (DDT) is not applicable
In the case of a company, if the owners withdraw the profit from the company, an additional tax liability of 15% (plus surcharge and education cess) in the form of DDT is payable by the company. However, in the case of LLP no such tax is payable and the profit of LLP can be easily withdrawn by the partners.
Disadvantages of LLP registration:
LLP also has various disadvantages as compared to a private limited company as follows:
Penalty for non-compliance
Even if there is no activity in the LLP, it is necessary to file an income tax return and MCA annual return every year. If LLP fails to file Form 8 or Form 11 (LLP Annual Filing), a penalty of Rs. 100 per day is applicable per form. There is no cap on the penalty and if the LLP has not filed its annual return for a few years it could come in the millions.
In the case of an ownership or partnership pay firm, there is no need to file an annual return. As such, only penalties will apply under the Income Tax Act.
Inability to invest equity
Similarly, LLPs do not have the same concept of equity or shareholding as the company. Therefore, angel investors cannot invest in LLPs as HNIs, venture capital and private equity fund shareholders. Thus, most LLPs will have to rely on funding and debt from promoters.
High income tax rate
A company with a turnover of up to Rs 250 crore has an income tax rate of 25%. Further decline in 2019 for new companies involve in production However, LLP is taxed at 30% regardless of turnover.