Introduction
With the emergence of so many Start-Ups in recent times & the focus of Government on ease of doing business, LLP i.e. Limited Liability Partnership as the name suggests where the Liability of the Partners are limited to the extent of their capital contribution.
It is a perfect blend/mixture of Company and Partnership firm containing some features of Company and some of Partnership firm.
As compared to Company, it has lesser compliances & less compliance cost too and is best suited for new startups and small business
Benefits of registration of LLP as compared to Company
1) Less Compliances
- Unlike Company, LLPs does not have to appoint Statutory Auditor i.e. Chartered Accountant to audit their books of accounts until turnover exceeds forty lakhs or contribution exceeds twenty lakh rupees in any financial year while in Company, appointment of Statutory Auditor is mandatory irrespective of turnover and paid up Share Capital limit
- Unlike Company, there is no statutory requirement of holding minimum number of meetings of the Board and Annual General meeting of members in a year
- Unlike Company, there is no requirement to file any Business commencement form or form for acceptance of Borrowings or form in respect of payments due to MSMEs
- Unlike Company, LLP Closure is quite easy
2) Lesser cost of compliances
- Unlike Company, registration cost is quiet less for registration of LLP
- Even statutory cost for closure of LLP is Rs. 500/- whereas in the company, statutory cost for closure is Rs. 10,000/-
- Fees for filing certain forms of LLP is quiet less as compared to Company
3) Compliances for LLPs
- Unlike Company, following are the few mandatory compliances to be made for LLP
- Filing of form 11 – Annual Return of Company
- Filing of form 8 – Statement of Accounts & Solvency
- Designated Partner’s KYC
- Filing of Income Tax Return of LLP
4)Non-applicability of Dividend Distribution Tax
In the case of a company, if the owners withdraw profits from the company, then tax liability in the form of DDT @ 15% (plus surcharge & education cess) is payable by the company.
However, no such tax is payable in the case of Limited Liability Partnership and profits of an LLP can be easily withdrawn by the partners.
5) Allowance of deduction in Income Tax
Remuneration and interest paid to partner’s deduction is allowed while calculating net turnover of LLP if paid within the limits prescribed in Income Tax Act, 1961.
CONCLUSION
Considering the above aspects and with the emergence of Start-Ups, LLPs is a quite better form of business model to start with many benefits like lesser compliances, compliance costs & regulatory requirements.
Disclaimer: The Author does not in any way take responsibility & guarantee towards the 100% accuracy of the information provided in this article. The Author has tried to prepare the article based on the relevant information available & is a mere opinion of the author. Other views are most welcome for the suggestions or improvements to be done in the article.
The Author is a Company Secretary in practice & for any query/suggestion can be reached at +91-8826108009 or Email at cs.lakshaysethi@gmail.com
Author Bio
As per above article, I see that their is less compliance to be fulfil by the LLP, but at the same time I also see that RBI has not authorised LLP to do business transactions more conveniently, as compared to Private Limited companies in its various foreign remittance regulations. So can we say less compliances has its drawback also.