21 Mar 2018

Limited Liability Partnership (LLP)

Finance feed by:

CA Rahul Agarwal
B.com (Hons),CA
CA in Practice
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   •    13 Year 3 Month  experience

LLP is a combination of both partnership and corporation. It has the feature of both these forms. As the name suggests partners have limited liability in the company which means that personal assets of the partners are not used for paying off the debts of the company. Nowadays it has become very popular form of business as many entrepreneurs are opting this. There are a number of partners in the firm and hence they are not liable or responsible for others misconduct. Every one is liable for their own acts. All limited liability partnership is governed under the limited liability partnership act of 2008. However in India LLP was introduced in April 2009.

1. Easy to form- Forming an LLP is an easy process. It is not complicated and time consuming like the process of a company. The minimum amount of fees for incorporating an LLP is Rs 500 and the maximum amount which can be spent is Rs 5600.

2. Liability- The partners of the LLP is having limited liability which means partners are not liable to pay the debts of the company from their personal assets. No partner is responsible for any other partner misbehaves or misconduct.


3. Perpetual succession- The life of the Limited Liability Partnership is not affected by death, retirement or insolvency of the partner. The LLP will get winded up only as per provisions of the act of 2008.

4. Management of the company- All the decisions and various management activities are seen and done by the directors of the company. Shareholders receive very less power as compared to the board of directors.

5. Easy transferability of ownership- There is no restriction upon joining and leaving the LLP. It is easy to admit as a partner and to leave the firm or to easily transfer the ownership on others.

6. Taxation- Yes, it is the benefit of LLP. Limited liability partnership is exempted from various taxes such as dividend distribution tax and minimum alternative tax. The rate of tax on Limited Liability Partnership is less than as compared to the company.

7. No compulsory audit required- Every business has to appoint an auditor for checking the internal management of the company and its accounts. However, in the case of LLP, there is no mandatory audit required. The audit is required only in those cases where the turnover of the company exceeds Rs 40 lakhs and where the contribution exceeds Rs 25 lakhs.

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