Why choose LLP as a business unit
LLP is an abridged version of a limited liability partnership. It is an alternative business structure that, apart from giving any company limited liability benefits, it has the flexibility of a partnership. This form of business structure is independent of changes in the company’s partners. This growing structure is emerging as a popular form of business organization for many licensed professionals such as lawyers, doctors, accountants, etc. This concept of business has been accepted in countries such as the UK, USA, Germany, and Australia. In the United Kingdom, the LLP Act was enacted in 2000, the LLP Act in India was passed in 2008 for the smooth functioning of the LLP, and in the United States, the LLP became part of the Uniform Partnership Act in 1996.
An important advantage of LLP is that it allows individual partners to be barred from joint liability of partners in a partnership firm. Where there are other business structures to choose from, it is necessary to discuss the benefits of choosing LLP as your business structure. there are some points that you must need to remember about why you should choose LLP as your business unit.
Why choose an LLP?
There are many aspects to prioritizing LLP as your business structure. come to discuss the points in detail-
Convenient construction with minimal contribution:
By not having the minimum capital required for formation, limited liability partnerships make it easier for partners to join hands, even with the least amount of capital they have. Furthermore, the capital required can be in any tangible form such as land, machinery, or intangible properties.
No limit on the number of business owners:
LLP can have a number of partners starting at two. There can be no limit to the maximum number of partners in an LLP.
Liability:
LLPs exist as separate legal frameworks from owners. All obligations for repayment of debts or lawsuits made by either LLP, lie on the firm and not on the owners.
The flexibility of management:
The Act 2008 of LLP gives the LLP complete freedom to manage its affairs. It is entirely up to the owners how they want their business to run as an LLP agreement and be successful. The point to note here is that the partners or owners have no right to claim any property in the LLP in case of dispute between each other. The partners in LLP may agree to entrust daily business operations to a managing partner or committee consisting of partners. Partners may decide to divide duties based on their expertise and roles.
Capacity to file sue
An LLP, as a judicial legal entity, can sue in its own name and is also vulnerable to being sued by others. The partners are not liable to sue LLP for arrears.
Low registration cost
LLP has lower registration costs than any other company (public or private). In addition, the LLP company registration process is quite simple, and the average time required for the company registration for the LLP process should be completed around 15–20 days.
Group resourcing and pooling of efforts increase productivity:
Most LLPs are created by a group of experts and experienced professionals, each with its own resources. They pool their resources and reduce the cost of doing business in addition to increasing the company’s capacity for growth.
Audit not compulsory:
Limited liability partnership firms have received the compliance benefit that audits are not mandatory. This is a significant benefit for those who are going to start LLP. Taxes are audited in LLP-
The annual contribution exceeds Rs. 2.5 million
Annual turnover exceeds Rs. 40 lakhs
Partner’s mid-way entry or exit:
In an LLP, the agreement underscores another basic feature that existing partners can exit the company, and new partners can also be added to their businesses. Typically, the decision to add a new partner requires approval from existing partners.
Taxation outlook:
Limited liability companies are liable to pay tax at a flat rate of 30% of their total income. In case the total income exceeds Rs. 1 crore, an LLP is also liable to pay a surcharge @ 12% on income tax. Additionally, a health and education cess of 4% is payable on income tax and surcharge.
Ground level:
LLP is a growing requirement of a growing market scenario. Such a framework works best for companies working in areas related to services or knowledge or technology. Knowing all the facts and figures associated with an LLP, one can choose the right one for the easiest handling and for any start-up.
Please note that every registered company such as a Partnership company, OPC, or LLP must require to file LLP Annual compliances on time.
