There are many different ways to form a business, and one of the more common ways is through a Limited Liability Partnership, or LLP. This type of business structure that involves two or more people coming together to own and operate a single business. There is a wealth of benefits to be enjoyed and reasons that people choose to go the limited liability partnership route for their business. Tax benefits and limited liability are two of the biggest. While there are many great reasons to choose an LLP, and also some significant draw backs in choosing this structure.
LLP means Limited Liability Partnership. It is a separate legal entity and business organisation that gives the benefit of limited liability of company and the flexibility of a partnership. LLP is new form of business entity with limited liability.
Limited Liability Partnership not only gives the benefits of limited liability at low compliance cost but allows its partners the flexibility of organising their internal structure as a traditional partnership. LLP will be liable for the full extent of its assets and the liability of partners will be limited.
While EZTax.in will take care of the entire process in registering a company, below are few steps to understand the process.
The following are the advantages of forming LLP
Maintenance of Books of Accounts: The LLP should maintain such proper books of accounts like Bank book, cash book, ledgers, expenses , incorporation certificate, Annual returns etc which is related to its affairs for each year of its existence at its registered business place on case basis or accrual basis
Rates of Income applicable to Limited Liability Partnership (LLP): LLP’s are required to pay flat 30% on total Income (profit). Surcharge @ 12% is levied if the LLP total income exceeds Rs 1 Crore.
Example: Let’s Consider the following example with 2 income slabs
|Tax Type||Total Income is 10 lakhs||Total Income is 1 crore|
|Income Tax||Rs. 3,00,000||Rs. 3,00,0000|
|Surcharge||Rs. 0||Rs. 3,60,000|
|Education cess @ 4%||Rs. 12,000||Rs. 1,34,400|
|Total Income Tax||Rs. 3,12,000||Rs. 34,94,400|
Any existing partnership firm that is willing to get converted into LLP will need to apply through Form 17 (Application and statement for the conversion of a firm into LLP. Form 17 needs to be filed along with Form 2 (Incorporation document and Subscriber’s statement).
Any private company/ unlisted public company that is willing to get converted into LLP need to apply through Form 18 (Application and Statement for conversion of a private company/ unlisted public company into limited liability partnership (LLP)). Form 17 needs to be filed along with Form 2 (Incorporation document and Subscriber’s statement).
Any Foreign LLP can establish its place of business in India by filling Form 27 (Registration of particulars by Foreign Limited Liability Partnership (FLLP)).
The eForm has to be digitally signed by authorized representative of the FLLP.There is no mandatory requirement to apply and obtain DPIN or DIN for Designated Partners of FLLP but the DSC of the authorized representative is mandatory.
Any individual or body corporate may be a partner in a LLP. However an individual shall not be capable of becoming a partner of a LLP, if—
Appointment of at least two “Designated Partners” shall be mandatory for all LLPs. “Designated Partners” shall also be accountable for regulatory and legal compliances, besides their liability as ‘partners, per-se”.
Every LLP shall be required to have atleast two Designated Partners who shall be individuals and at least one of the Designated Partner shall be a resident of India. In case of a LLP in which all the partners are bodies corporate or in which one or more partners are individuals and bodies corporate, at least two individuals who are partners of such LLP or nominees of such bodies corporate shall act as designated partners.
The minimum number of partners required to form LLP is 2 members and there is no limit for maximum number of partners.
The Liability of partners is limited to the extent of agreed contribution except in case of intention is wilful fraud
Yes, Foreign Nationals can become partners on LLP
No, the Minor cannot be admitted as partners of LLP.
There are several differences between LLP and Partnership Firm
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