Benefits of Limited Liability Partnership

Benefits of Limited Liability Partnership (LLP):

LLP is a type of organisation which is legally recognised corporate entity having the benefits of both company and a partnership firm. It is governed by Limited Liability Partnership Act, 2008. The main benefit of LLP which makes it different from traditional partnership firms is its Legal Status and the liability of Partners is limited to their contribution made to LLP.

After Companies Act, 2013 coming in to force there are many compliances and complications which are much cost and time consuming. The following are the benefits of LLP when compared to a Company.

1.      A Private Limited has a restriction over the members that are restricted to 200, where in case of LLP there is no limit.

2.      No restrictions for Loans & Borrowings as per LLP when compared to companies have to comply Section 180 & 179.

3.      As per Companies Act, advances from customers pending for more than one year will be treated as deposits and compliance should be made accordingly. This provision is not applicable as per LLP Act.

4.      The Private Limited Company has to have a minimum contribution of Rs.1,00,000/- capital. LLP has no such restriction for capital contribution. Partners can start a LLP without contributing anything towards capital.

5.      Every company has to undergo statutory audit as per companies act every year regardless of capital and turnover. LLP Act has given limits which gives relaxation for the LLP’s having turnover less than Rs.40 Lacs and contributions from the partner less than Rs.25 Lacs.

6.      Company has to file documents like AOC 4, MGT 7, mandatory board meetings, maintenance of statutory records as per Companies Act, etc. while LLP has to file only statement of accounts and solvency. Also companies attract much compliance for any change in business, place, directors and key managerial persons, whereas LLP has very less legal formalities.

7.      Addition or deletion of directors is streamlined in LLP as we have to only alter the LLP agreement and file E forms 3 & 4.  Whereas in case of company it requires to pass Resolution in General Meeting, File e-form-DIR-12 and require many documents from the person who is appointed as Director. (As per Section-152 of Companies Act-2013.)

8.      Change in registered office in LLP requires only amendment of LLP agreement and file E-From 15 wherein case of company lengthy process need to be followed.

9.      Assets Charged against loans or guarantee in the name of LLP need not be registered with Authorities unlike Companies..

10.  LLP Agreement is the only main document defining the activities against the MOA, AOA, etc in case of companies. This attracts less compliance as any change in MOA and AOA requires Board and general resolutions and statutory filings.

11.  Partners can avail Interest on capital which reduces the tax liability of the firm.