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What is LLP Registration?

A corporate business vehicle that enables professional expertise and entrepreneurial initiative to combine and operate in flexible, innovative and efficient manner, providing benefits of limited liability while allowing its members the flexibility for organizing their internal structure as a partnership.
Limited Liability Partnership (LLP), introduced only in 2008, has quickly become a popular legal structure for businesses. Its main improvement over the General Partnership is that, as the name indicates, it limits the liabilities of its partners to their contributions to the business and also offers each partner protection from the negligence, misdeeds or incompetence of the other partners.

Comparison Between Private Limited Company and LLP

Private Limited Company LLP
Minimum Number of Partner and Shareholder The minimum number of shareholder required for a company is 2 and there can be upto 50 shareholders, in case of a private limited company. For formation of an LLP , minimum of 2 Partners are required. There is no limit to the maximum number of Partners. A body corporate can be a member of an LLP.
Cost to Incorporation & Running Cost A private limited company costs at least Rs. 15,000 to start. But once this is done, you need to shell out at least Rs. 15,000 a year to comply with the MCA’s rules and regulations, some of which begin as soon as you incorporate. Then there’s the need for an audit, which will again cost you a minimum of Rs. 15,000. That works out to Rs. 45,000 a year. An LLP is much cheaper. It costs just around Rs. 11,000 to register and around Rs. 4,000 to comply with MCA regulations. Moreover, you only need to conduct an audit once you have a turnover of over Rs. 40 lakh and paid-up capital of over Rs. 25 lakh. This means that for the price of starting a private limited company you can start and maintain an LLP in its first year.
Tax Structure Firstly, a company is liable to pay tax on the income of the corporate. Income tax on a limited liability company is levied at the rate of 30%. A company is subjected to dividend distribution tax when it pays dividend. Under the Income Tax Act, Dividend distribution tax is charged at the rate of 16%. Third kind of tax applicable on a company is Minimum Alternate Tax Taxation structure for LLP is simpler. LLP is subjected only to Income tax and Alternate Minimum Tax. Dividend Distribution is not applicable on LLP. Once profit is declared and tax is paid by LLP, the distributed income is tax free in the hands of the partners. Tax is levied on the firm at the rate of 30%.

Documents Required for LLP Registration

  • Scanned copy of PAN Card or Passport (Foreign Nationals & NRIs)
  • Scanned copy of Voter’s ID/Passport/Driver’s License
  • Scanned copy of Latest Bank Statement/Telephone or Mobile Bill/Electricity or Gas Bill
  • Scanned passport-sized photograph
  • Specimen signature (blank document with signature [partners only])
Note: Any one of the partners must self-attest the first three documents. In case of foreign nationals and NRIs, all the documents must be notarised (if currently in India or a non-Commonwealth country) or apostilled (if in a Commonwealth country).

Limited Liability:

Businesses often need to borrow money. In a General Partnership, partners are personally liable for all this debt. So if it cannot be repaid by the business, the partners would have to sell their personal possessions to do so. In an LLP, only the amount invested in starting the business would be lost; all personal property would be safe.

Reduced Compliance

An LLP only requires audited annual returns to be filed if it has a turnover of greater than Rs. 40 lakh or capital contribution of over Rs. 25 lakh. It also needs to communicate fewer business transactions and structural changes than a private limited company.

Tax Advantages

There are some important advantages over the private limited company. For example, Dividend Distribution Tax and tax surcharge don’t apply. Loans to partners are also not taxable as income.

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