LLP (Limited Liability Partnership) has its own advantage when compared to the traditional partnership and the Private Limited, as it picks the best of these two structures in one solid viable package. It tackles various challenges that entrepreneur faces when using a traditional partnership structure.
The main focus of any Start-up is to keep the recurring cost at a bare minimum and yet run the company without any hiccups, as one of the major costs are related to accounting & compliance when compared to Pvt Ltd.
In this article (Part I), we take positive things of LLP and delve on its pros and cons thereby understand the LLP offerings.
- No minimum capital contribution required
LLP could be formed without any minimum capital contribution as opposed to the Private Limited companies’ requirement of Rs. 1 Lac. Even the contributions could be made in installments which makes the small entrepreneurs/startups avail these benefits and forge ahead.For instance that the partners can bring minimum capital say Rs. 5000 /Rs. 10000/Rs. 20000/- because there is no restriction provided under the LLP Act to bring a minimum capital contribution at the time of incorporation. - Liability is Limited
The liability of each partner is limited to the extent of his/her contribution/share as opposed to the sole proprietorship or the traditional partnership firm where the personal assets of the proprietor or partners could be at risk in the event of a failure of the business. Thus this mode helps the partners to be free from personal liabilities or becoming bankrupt (except in cases of fraud by any partner). Its quite safe compared to the unlimited liability which offered by partnership firm. - Separate legal entity
LLP has its separate existence from its partners. LLP can sue and be sued in its own existence. Due to its status , the entry and exit of the partners don’t affect the LLP. As it incorporates various stakeholders(i.e. Suppliers, Customers etc.), it offers the flexibility while dealing & signing legal contracts and in many other things. - Economics & Working
Statutory filing fees as well as the cost of formation is less compared to forming a Private limited company. Apart from stamp duty for executing LLP agreement the registration fees are less than required for incorporation for a private Limited company.
Partners are not subjected to hold 4 mandatory board meetings as required in once in a year by Companies Act. The partners can meet as per their convenience or need basis. Partners can specify about the meetings details & schedule in the LLP agreement.
This article was also published in MarketExpress – a Financial & Business News, Analysis, Insights, Opinions & Research Portal. Click here to read the article.
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Legal Disclaimer:
I want to form an LLP in India with a resident and an OCI holder… My query is can we take OCI holder as partner without contributing to capital (since his investmet in LLP will require RBI apptoval)
and how will he sign on subscription sheet and LLP deed since it has yo be done in presence of professional and notary..?
Thanks in advance
Whoever is the partner has to contribute in LLP. Being OCI holder, any investment towards capital of LLP will attract the provisions of FDI Policy and needs to obtain prior approval of RBI before investment in India. The subscription sheet, consent to act, LLP agreement shall be separately signed by you outside India and then obtain notary from Foreign Public notary and Indian Consulate. The person who is residing in India shall get documents notarised from Local Lawyer.
Thanks for ur reply, can u help us in taking RBI approvals what time it will takeandhow much cost involved?
Please call me.
I need to know the whole procedure of document need to start a biofertilizer manufacturing unit
Please call me.
Mam,
Can a LLP be converted into Private Limited Company under Companies Act?
Does the Companies Act, 2013 contain any provisions relating to conversion of LLP into private limited company?
There is no provision under LLP as well as Company Act 2013 , for conversion of LLP into Private Limited company.
VERY NICE…
Thanks
You have a very informative blog.
We are a Pvt Ltd company with 4 director and we are 3 years old company.
TO is Rs.1Cr. Would you suggest us to change to LLP from Pvt Ltd.?
Kindly reply.
Thanks and regards.
Private Limited company can be changed into LLP. Before I would advise you to change the status of company to LLP, I would like to know more details about the existing company. Hence please call me.
MAM,
CAN A LLP PROVIDE LOAN TO PVT LTD COMPANY OR VICE-VERSA ACCORDING TO COMPANIES ACT,2013
LLP cannot provide loan to private ltd, but I think Private ltd can give loan to LLP.
What is the procedure for conversion of LLP to Pvt Ltd Company?
Sorry for the delayed reply. Conversion of LLP into Pvt company is not possible by law.
Madam,
I want to form a LLP with 2 Designated Partners.
Following are my queries,
1. One DP is OCI (non resident Indian) and does not have a DPIN. So what are the formalities to be done for getting his DPIN as he is a non resident?
2. As per the rules of new Act 2013 DIN will require approval of Central Government. So how much time it will take to obtain a permanent DPIN?
3. If the Designated Partners wants a fixed salary per month then how to put this in LLP Agreement and can the Designated Partners give loans to LLP and vice versa?
OCI holder can apply for DIN by submitting his identity proof and address proof ( like passport and address proof like driving licence). DIN is approved under Straight Through process. You can insert clauses in LLP agreement as per your wishes.
madom,
can u tell me the cost incured in connection with the formation of an LLP
I cannot tell the cost of formation of LLP without any information from you. It depends on various factors. You may call me to discuss.
Hi,
Want to know pros and cons of converting Pvt. Ltd. to LLP. Have a business for 5 years. Also, have a name trademarked, will I loss the same due to conversion.
After conversion of Private into LLP, the advantage will be :- no need to appoint Statutory auditor as per LLP Act. There are less compliance with regards to annual filing with ROC. Due to conversion there will not be any loss only you will have to intimate the change in type of company to Trade Mark Registry.
Hi Mam…Myself Vishal and am trying for Australian PR through one of the Agency here in bangalore. To check wether the company is genuine i checked for LLP registration with Ministry of Corporate Affairs and its found that the company is been registered. So should i think that the company is a genuine if its registred under Minstry of Corporate Affairs.. Please guide me mam.Will really appreciate ur valuable time in guiding me in this regards as i am bit confused……Vishal
If the company is registered and found company master data on Ministry of Corporate Affairs then that company is genuine.
Hello Madam,
I would likes to start a company and is an IT product based company.I have a dilemma interms of registration process whether to register it as a pvt ltd or llp company.Could you help me to take a right decision.
Please call me
Madam,
Your blog is really very informative, I appreciate your sincere efforts.
Thanks!!
can a llp be shareholder/member in company??
Yes, LLP can be shareholder or member in company because LLP is a body corporate having separate legal entity.