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What is an LLP and their benefits



Limited Liability Partnership (LLP) is a partnership firm where liability of some or all the partners have limited means that the personal assets of the partners are not used for paying off the debts of the firm while under the Partnership Firm the liability of the partners are not limited i.e. the personal assets can be used for paying off the debts of the firm. All LLPs is governed under the limited liability partnership act 2008.  

Features of LLP-

  • It is the mixture of Partnership Firm and corporations.
  • It has separate legal entity like companies.
  • Minimum number of partners under LLP is 2.
  • No limit on maximum number of partners.
  • No requirement of Minimum Capital Contribution.
  • At least one Partner is Indian Resident.
  • It does not require audit if it has less than Rs. 40 lakhs of turnover and less than Rs.25 lakhs of capital contribution.


Benefits of LLP-

  • Forming of an LLP is an easy process as compared to registration of a company.
  • There is no restriction on admission or leaving of any partner. The partners can easily transfer the ownership to others.
  • It has low cost of formation and easy to form.
  • The liability of partners under LLP is limited, no personal assets can be used to pay off debts of the company.
  • The liability of each partners is limited to share as written in the agreement filed at the time of creation of LLP. Each partner is not responsible or liable for another partner's misconduct or negligence.
  • There is no affect on LLP on retirement, death or insolvency of any partner.
  • There are not such restrictions or compliance as compared to companies.
  • LLP has separate legal entity i.e. it can sue in its name and be sued by others or even the partners are not liable to be sued for dues against the LLP. It is an artificial judicial person, can acquire, own, enjoy and sell, property in its name. No Partner can make any claim upon the property of the LLP.
  • All companies, whether private or public, irrespective of their share capital, are required to get their accounts audited. But in case of LLP, there is no such mandatory requirement if it has less than Rs. 40 lakhs of turnover and less than Rs.25 lakhs of capital contribution.


Drawback of forming LLP-

  • LLP cannot raise funds through IPO, means LLP cannot issue share to the public and cannot raise money from the public.
  • LLPs' are prohibited in few states. Due to the advantages of an LLP, few states restrict the incorporation or impose extra taxation to discourage LLP's in their state. 
  • LLPs have also to file MCA annual return each year while in case of a proprietorship or partnership firm, there is no requirement for filing such annual return.
  • LLP have less creditability as compared to the corporations. Corporations can easily issue loans and funds from the public as well banks but in the case of LLP, they don't have the privilege to mobilise funds due to lack of creditability.


LLPs are taxed @ 30% on the net income.


  • If Total Income up to Rs. 1 Crore – No Surcharge
  • If Total Income is greater than Rs. 1 Crore – 12% of Income Tax
 Education Cess & Secondary & Higher Education Cess-  
4% (on the amount of income-tax and surcharge


Minimum Alternate Tax-

Like a private limited company or LLP, Partnership Firm are also required to pay tax @ 18.5% (+SC+EC+SHEC) of adjusted total income as per section 115JC.


Tax Esquire on 6/20/2023 1:32:24 PM says:
I found your insights on limited liability company registration very helpful. It's important for entrepreneurs to unders

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