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WHAT IS LLP?
LLP partnership means limited liability partnership which is governed by Limited Liability Partnership act 2008.In this all the partners have limited liabilities. I exhibits the elements of both partnership as well as cooperation. In LLP each partner is not liable for another partners’ misconduct or negligence unlike, traditional unlimited partnership under partnership act 1890 in which each partner is severally and jointly liable. Due to this feature of limited liability investors wish to take an active role in management.
It requires minimal maintenance. The directors of a private limited company to creditors. In case of default, banks/creditors can only sell company’s assets and not personal assets of directors. The LLP is cheaper to incorporate than a private limited company, requires fewer compliances and can be a smart choice from tax perspective. However if you are looking to raise venture capital or attract talent with employee stock options, private limited is the only way to go as LLPs cannot easily accommodate it.
Due to its dual advantage of company as well as partnership it is beneficial.
No partner will be responsible for other partners’ negligence or misconduct.
Cheaper to incorporate than a private limited company.
No risk of loosing personal assets
Tax advantages such as dividend distribution tax and tax surcharge don’t apply.
Public disclosure of accounts.
All the profits earned is effectively distributed with no flexibility to hold over profit to a future tax.