Benefits That MSMEs In India Can Get By Choosing LLP As A Business Form

Benefits That MSMEs In India Can Get By Choosing LLP As A Business Form

Defining the LLP.

Limited liability partnership is generally known as an LLP. It is a type of legal entity where all or few partners will have limited liability over their head. There are several types of business entities in India; the main distinction betwixt traditional partnership and LLP is that one partner will not be responsible for another’s negligence or misconduct.

A Limited Liability Partnership in India conjoins the limited liability of the company and the partnership’s flexibility with limited compliance costs.

Are you in indecision as to whether your business is suitable for LLP or not?

Which type of business should opt for LLP?

LLP is beneficial for all from small to large enterprises in general but specifically for service-based industry or sector involving professionals like architects, web designers, for instance, that do not need equity funding.

LLP is one of the easiest to form when it comes to the registration process that can be set up easily compared to private limited companies that do not need to arrange the board meetings or record minutes.

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As the LLP is itself liable for its debts run up while operating the business instead of individual firm’s partners, LLP is preferred only for profit-generating business. Nonetheless, it is vital to keep in mind that registering for LLP is not a suitable option when you want to infuse funds. Instead, you should form a private limited company or one-person company to serve the purpose.

Minimal desideratum to set up LLP in India.

– Minimal two partners (individual or body corporate).

– Minimal two designated partners who are persons and at least one of them has to be an Indian resident.

– Digital signature certificate (DSC).

– LLP agreement.

– LLP name.

– Registered office.

Advantages of the LLP registration in India.

Separate legal entity.

As it is a separate entity, you will have the power to carry out legal action against the LLP but not to the partners. It can sue and can be sued by others. One partner will not be responsible for the negligence and misconduct of the other partner.

– Persistent existence.

As LLP runs as a separate legal person, LLP’s existence remains the same in case of any partners’ demise. An LLP persists to remain unchanged even after the changes in the ownership.

– Minimal compliance.

As LLP needs minimal compliance. Nonetheless, compliance is only required for companies whose turnover exceeds Rs. 40 lacs or capital contribution not more than Rs. 25 lacs. That’s why LLPs are suitable for start-ups and small businesses that are just initiating their operations and intend to have minimal compliance concerning formalities.

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– Transfer of ownership is easy.

The LLP’s ownership can be easily transferred to another individual by inducting them as an LLP partner.

– Possessing property.

The LLP is an artificial judicial person, can obtain, enjoy, own and sell, property in its name. No associate can claim the LLP’s property so long as the business is a running entity.

– Easy to wind up.

LLP can be easily wound up in comparison to a business having a private limited company registration. It usually takes 2-3 months that is less than the winding-up process of a private limited company.


– What is the DIN (directors identification number) for LLP?

It is a permanent number issued by the RoC (Registrar of companies) as a unique identification number to the designated associates of the LLP. No person is allowed to hold the office of a designated partner without DIN. For DIN allocation, one will have to apply to MCA with photo, attested ID, and address proof duly attested by CS, CA, or CMA.

– Who is allowed to become a designated partner in the LLP?

Any person or a company or an LLP is allowed to become a partner. Nonetheless, only a person can become a designated partner in an LLP.

– Who can initiate LLP?

Any group of individuals who possess or intend to invest money in the business can initiate an LLP. A person or an investor can become a partner as per the LLP agreement, as offered in the LLP act, 2008, and partners and investors are owners of the partners initiated under the LLP.

– Define the LLP agreement.

LLP partners bind themselves to their mutual rights and obligation, capital contribution ratio, and profit-sharing ratio in a document referred to as the LLP agreement. Once the LLP incorporation is done, partners will have to execute the same and submit a copy with RoC within one month of incorporation, non-compliance, resulting in a penalty of Rs. 100/day for delay.

In conclusion.

Formulating LLP in India is very easy and less cumbersome than other forms of business, and it also offers numerous benefits as listed above to MSMEs.

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Shankar is a tech blogger who occasionally enjoys penning historical fiction. With over a thousand articles written on tech, business, finance, marketing, mobile, social media, cloud storage, software, and general topics, he has been creating material for the past eight years.

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