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Frequently asked Questions
Whether an LLP outshines a Private Limited Company (Pvt Ltd) depends on your business goals. A Pvt Ltd often edges out with better access to funding and credibility, especially for growth-focused ventures. Meanwhile, an LLP shines with its flexibility, lighter compliance load and simpler management structure.
An LLP in India is a separate legal entity, distinct from its partners. It requires at least two individuals to come together as partners, with no cap on the maximum number. You’ll need at least two designated partners and one must be a resident of India.
In a Limited Liability Partnership (LLP), each partner’s personal responsibility for the firm’s debts is capped. While partners may still be liable for contractual obligations (depending on local laws), they’re generally not on the hook for damages caused by other partners’ actions.
एक निजी लिमिटेड कंपनी उन लोगों के लिए बेहतर है जो पूंजी जुटाने और तेजी से विस्तार की योजना बना रहे हैं। दूसरी ओर, एलएलपी अधिक लचीलापन और कम अनुपालन जरूरतों के साथ आता है। दोनों देयता को सीमित करते हैं, लेकिन निजी कंपनियां बाहरी निवेश के लिए ज्यादा अवसर देती हैं।
One key drawback of an LLP is public disclosure. Financial statements must be filed with Companies House, available for anyone to see. This could reveal partners’ income—details they might prefer to keep private. Plus, that income is taxed at personal rates.
Unlike a sole proprietorship, where the owner faces unlimited liability with no legal divide between personal and business assets, an LLP offers partners limited liability. This protects their personal wealth from business debts or claims.
No, in India, a single individual cannot form an LLP. The law requires at least two partners to establish it.
Minors, individuals deemed mentally incompetent, undischarged insolvents or those who’ve applied to be declared insolvent cannot become partners in an LLP.
An LLP is a hybrid structure blending partnership flexibility with company-style liability protection. It keeps each partner’s personal assets safe from the LLP’s debts or obligations.
An LLP suits professional service firms with shared management duties, while an LLC (Limited Liability Company) offers more ownership flexibility, often favored by startups. Both shield liability, but their legal frameworks and compliance needs vary.
In economic terms, an LLP is a business setup where two or more people run the show, sharing management duties while keeping their personal liability for the firm’s debts in check.
Think law firms, accounting practices or consulting groups—big names like PwC and Ernst & Young often operate as LLPs in various countries.
The LLP Agreement is the backbone of the partnership. It spells out each partner’s role, responsibilities, profit shares and decision-making power, setting the rules for how the LLP operates.
A Limited Partnership has at least one partner with unlimited liability, while an LLP ensures all partners have limited liability. LLPs are a newer option, often chosen for equal protection across the board.
No, only specific types like Limited Liability Partnerships (LLPs) and Limited Liability Limited Partnerships (LLLPs) provide limited liability. Traditional partnerships leave partners fully exposed to business risks.
Limited liability shields partners’ personal assets from business debts or lawsuits. It lowers the stakes, making it easier to take smart risks and grow.
Yes, ownership can shift in an LLP, but it follows the terms laid out in the LLP Agreement. This flexibility supports long-term planning and scalability.
Advantages include liability protection for general partners and options for structuring investments. On the flip side, setup can be trickier and it’s not available everywhere.
No, an LLP can’t be set up for nonprofit purposes in India. It’s built for business, not charity and can’t raise public funds. Plus, at least one designated partner must live in India and under Part IX of the Companies Act of 1956, seven partners are needed for certain conversions.
An LLP faces a flat 30% tax rate on its profits in India, though partners pay personal income tax on their shares.
If an LLP’s annual turnover tops ₹40 lakhs or its contributions exceed ₹25 lakhs, a qualified chartered accountant must audit its finances.
