Limited Liability Partnership
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Limited liability partnership is a partnership but as it is clear from the name itself, it has a limited burden of liability distinct from the traditional one where the liability is not limited and all the partners have to bear the burden in case of loss in business.
An LLP have the benefits of both a Partnership and a company. In reality, It lies somewhere between the partnership and the body corporate. In other words LLP is an alternative corporate business form that gives the benefits of limited liability of a company and the flexibility of a partnership.
LLP is one of the easiest types of business to incorporate and manage in India. With an easy incorporation process and simple compliance formalities, LLPs are preferred by Professionals, Micro and Small businesses that are family-owned or closely-held. Since LLPs are not capable of issuing equity shares, LLP should NOT be chosen for any business that has plans for raising equity funds from Angel Investors, Venture Capitalist or Private Equity Funds.
Difference between LLP and general partnership
- Legislation: LLP is governed by the LLP Act and Companies Act, while partnership is governed by the Indian Partnership Act.
- Legal Entity: LLP has a separate legal entity, while partnership does not.
- Perpetual Succession: LLP practices perpetual succession, while a partnership does not.
- Minimum Members: Both LLP and Partnership require a minimum of two members.
- Maximum Members: Partnership has a maximum of 20 members, while LLP has no such restriction.
- Capital Contribution: LLP requires partners to contribute capital, whereas partnership does not have this requirement.
- Partner Identity: LLP requires designated partners to obtain a DPIN, whereas there's no such requirement in a partnership.
- Liability: In LLP, liability is limited to the contribution of partners, while in a general partnership, liability is unlimited. Additionally, in an LLP, some partners can have limited liability, unlike a partnership where all partners have unlimited liability.
Difference between Company and LLP
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Capital Requirements:
A private company requires a minimum capital of 1 lakh, and a public company requires 5 lakh, while there's no minimum requirement for establishing an LLP. However, contribution as per the LLP Act is needed.
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Director/Partner Identification:
In a company, all directors must obtain a DIN (Director's Identification Number), while in an LLP, only designated partners need to obtain a DPIN (Designated Partners Identification Number).
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Business Preference:
Companies are mostly preferred for large businesses, while LLPs are favored by professionals.
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Stock Market Listing:
Listing on the stock market is possible for a company but not for an LLP.
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Decision Making:
In a company, the consent of shareholders isn't required for day-to-day decisions, whereas in an LLP, the consent of partners is necessary.
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Common Seal Requirement:
A company must have a common seal, whereas it's optional for an LLP.
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Decision Authority:
In a company, the authority to conduct business lies with the board of directors, while in an LLP, every partner has the authority unless specified otherwise by the LLP Act.
Documents Required
- PAN Card or Passport for Foreigners.
- Drivers license or Aadhar card, residence card or election identity card or any other identity proof issued by the Government.Less than 3 months old bank statement or telephone bill.
- Registered Office Proof.