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Limited Liability Partnership is a type of body corporate under the Companies Act, 2013 with features of a separate legal entity from the partners. The LLP has a perpetual succession and any change among the partners shall not affect the rights and liabilities of the LLP.
Though the name partnership, there is no applicability of the Indian Partnership Act, 1932 to an LLP. An LLP can have partners either or both individuals or companies.
There are certain disqualifications for partners as provided by the act. There shall be at least two designated partners and one of them a resident of India. The partner must give prior consent for acting in such form and manner.
The features of LLP are as follows:
Unlike Partnership firms, LLP has its own assets and liabilities in the name of the firm. The contracts are entered in the name of the firm as well.
The business profit shares are similar to the partnership firm. The ratio of profit is decided by the partners.
The designated partners can be an individual or body corporate either of them. An individual should be of sound mind and solvent where there is no pending application in the court.
An LLP can be incorporated with less contribution as the capital of the firm.
All the designated partners act as an agent and unlike partnership firms, the action of one partner does not bind another one.
As per the provisions of the Act, a partner is not an agent of other partners and liability is limited to an agreed contribution to the LLP.
The process of compliance is facilitated by the Ministry of Corporate Affairs (MCA) website.
A company can be converted into an LLP as per the provisions of the Act.
Copyright, a form of intellectual property law, protects original works of authorship, including literary, dramatic, musical, and artistic works such as poetry, novels, films, songs, computer software, and architecture. Copyright is not protecting the facts, ideas, systems, or methods of operation, although it may protect how these things are expressed.
The following are the advantages and disadvantages of LLP:
The major difference between an LLP and Partnership firm are as follows:
An LLP and Limited Partnerships (LPs) are different businesses carried by two or more individuals having different business needs.
|Basis||LLP||Proprietorship||Private Limited Company||Partnership|
|Meaning||It is a form of partnership that has limited liability for each partner.||It is a business owned by a single person who is responsible for the management and personally liable for debts.||It is a privately held business by two or more individuals having limited liability.||A business held by two or more partners who share the profits and losses.|
|Registration Process||It is registered under the Limited Liability Partnership Act, 2008||There is no compulsory registration required for Proprietorship||The Pvt Ltd company is registered under the Companies Act, 2013.||Registration is voluntary and not compulsory and optional for partnership firms.|
|Name of the Entity||The name must be as per the naming guidelines by the MCA and end with the LLP words.||A sole proprietor can choose any name for the business.||The name should be as per the guidelines and end with the Private Limited Company.||Any name can be chosen by the partners for the partnership.|
|Legal Status of Entity||An LLP has a distinct identity from its partners.||A proprietor and a business are the same.||A Pvt Ltd company is a separate entity from its members.||A partnership does not have a separate status from its partners.|
|Minimum Number of Members||The minimum number of members is two for an LLP.||The sole owner is the only member in this business.||The Pvt Ltd company has minimum two members.||There must be at least partners coming together for partnership.|
|Maximum Number of Members||An LLP has a maximum of unlimited partners.||A proprietorship has a single person who is the owner.||A Pvt Ltd Company has a maximum of 200 members.||A partnership can have unlimited members.|
|Member(s) Liability||An LLP has limited liability for its partners.||A proprietorship has an unlimited liability of the sole owner.||A Pvt Ltd company has limited liability of its members.||A partnership has unlimited liability on their partners.|
|Existence or Survivability||The life of business for an LLP does not depend on its partners||A proprietorship depends on the sole proprietor.||A Pvt Ltd company has perpetual succession.||A partnership business is dependent on its partners.|
|Documents Needed for Registration||An identity and address proof of partners and registered office proof is required.||An Aadhar card is required for MSME registration.||An Identity proof with address proof and photos, DSC of directors and members are required.||An identity proof with PAN card copy is required in case of registration.|
|Annual Filings||An LLP has minimal compliances.||A proprietorship does not have compulsory registration and thus, no compliance.||A Pvt Ltd company has to submit the annual filing for every year with the Registrar.||A partnership is not required to file annual accounts.|
|Registration Cost||The cost of registration is government fees and professional charges.||There is no compulsory cost of registration as it is voluntary.||The cost are the incorporation cost and professional fees.||The cost of registration is voluntary.|
|Statutory Meetings||There is no requirement for annual general meetings.||There are no provisions for meetings.||A Pvt Ltd company must conduct an annual general meeting.||There are no provisions for conducting meetings.|
|Taxation||The tax rate of 30% is applicable.||The tax is levied on the total income of sole proprietor.||The tax rate of 30% is applicable.||The tax rate of 30% is applicable on partnership.|
|Transferability||The ownership is transferrable.||There is no transferability.||The articles restrict the transferability of shares.||There is no provision for transferability.|
|Foreign Ownership||The foreigners can invest in LLP with RBI approval.||The foreigners cannot start a proprietorship firm.||The foreigners can invest in Pvt Ltd company.||The foreigners are unable to start a partnership.|
In addition to registration or incorporation, a business may require other registrations depending on the business activity undertaken. Talk to an Advisor to find out registrations your business may require post registration.
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