Why Should You Choose To Form An LLP As Your Business Structure?

  

  Introduction 

 

LLP stands for Limited Liability Partnership firm. It is an alternative business form that offers limited liability protection like all other business structures and the flexibility of a partnership. There is no impact on this type of business, when there is any change in the partners arrangement in the firm. This dynamic structure is rapidly becoming a common form of business formation for many individuals. Even in nations like the United States, the United Kingdom, Australia, and Germany, this business strategy is widely considered.

 

A key advantage of an LLP is that it shields an individual partner from joint liability and errors made by other partners in a partnership firm. While there are various company structures to select from, the Limited Liability Partnership (LLP) structure is a popular choice nowadays among the entrepreneurs. It is important to look into the benefits of selecting an LLP as your business structure. Keep reading this blog, we will talk about- "Why should you choose to form an LLP as your business structure?"

 

 

 Why Choose The LLP Structure For Your Business? 

 

There are several benefits of selecting an LLP as your business structure. Let us explore them in detail:

 

1. Easy Formation with low investment: A Limited Liability Partnership (LLP) enables partners to work together even if they have limited resources because there is no minimum capital requirement for establishment. Moreover, capital contributions can be contributed in any form including intangible assets, machinery, and land.

 

2. LLP can have an unlimited number of members: LLPs can have any number of partners but there is a minimum of 2 partners are required. The total number of partners that an LLP can have is unlimited.

 

3. Separate legal entity: The members of the LLP are not responsible for any liability incurred by LLP, whether it be debt payments or lawsuits because the LLP partnership structure is a separate legal entity from their partners or owners.

 

4. The ability to sue: An LLP, being a separate legal entity, can sue in its own name and can be sued by parties.

 

5. Flexibility in Management: The LLP agreement gives owners the freedom to choose how they want their company to run and expand. A managing partner or a committee leader can be appointed by the LLP partners to oversee day-to-day operations. In an LLP, management is completely flexible since partners can distribute tasks and responsibilities according to their expertise and skills.

 

6. Low Registration Fees: Compared to other business structures (like Public Limited Company or Private Limited Company), an LLP has a low registration cost. The registration procedure is pretty simple, and the average time required to complete the registration process is between 15 and 20 days.

 

7. Audits are optional: As audits are not optional, limited liability partnership firms have certain compliance perks over other business structures. For individuals who are starting an LLP, this is a huge advantage for them. Tax audits are only compulsory in cases where annual donations exceed INR 25 lakh and total income exceeds INR 40 lakh.

 

8. Partners mid-way entry or exit: One more fundamental aspect is allowed in the LLP agreement that the new partners who have their own companies can be added and old partners can easily leave the company. However, the current partners are required to approve the addition of a new partner.

 

9. Taxation outlook: The tax rate for limited liability partnerships is a flat 30% of their total turnover. An LLP should also pay an additional 12% surcharge on the income tax if the total income is more than INR 1 crore. Along with paying income tax plus the surcharge, there is also a 4% health and education fees to be paid.

 

 To Sum Up 

 

LLP partnership structure is more effective for companies that offer services or are engaged in technical or professional domains. It is also appropriate for companies that offer venture capital funding. We can conclude after reading this blog that registering your business as an LLP form of structure is more beneficial than any other form of business.