An overseas investor searching to setup business in India must consider multiple factors before choosing which kind of business to select. Limited Liability Partnership (LLP) is gaining recognition using its numerous benefits it provides towards the entrepreneur. LLP is really a business which mixes the limited liability of the company and also the versatility of the partnership.
LLP Registration in India mandates that the LLP should be employed in a business where 100% FDI is permitted
We’ve listed lower the characteristics on the LLP that ought to help you produce informed decision.
Partner’s Liability is restricted
Among the primary good reasons to register an LLP is restricted liability. Limited liability means limited contact with financial risk by investors of the company. Limited liability ensures the partner’s liability within the LLP is restricted towards the capital amount committed to the LLP.
For instance, if Mike invested Rs 50,000 to begin a LLP in India. The utmost liability he is able to have is Rs 50,000. Quite simply, his can potential loss can’t be beyond Rs 50,000. He will not be responsible for any liability beyond this initial Rs 50,000.
Another essential feature of the LLP would be that the act of 1 partner has no effect on another partner. For instance of 1 partner lent some cash in the specific LLP with no understanding from the other partner, another partners can’t be held liable.
Transfer and Exits
LLP has perpetual succession meaning, the LLP can continue its existence regardless of alterations in partners. Partners may appear and disappear however the LLP remains around. Someone of the LLP can resign and assign his profit discussing to a different person and exit the LLP. Exit formalities could be completed by means of executing an easy extra agreement.
Legal Compliance
Limited companies have to hold board meeting 4 occasions annually, at least one time in each and every quarter. It must also hold annual general meeting and keep minutes for such conferences. LLPs don’t have to stick to such compliance unless of course and otherwise specified by the LLP Agreement.
LLP do not need to get its accounts audited unless of course its turnover exceeds Rs. 40 Lacs or even the capital contribution is much more than Rs 25 Lacs any financial year.
Tax
LLPs don’t have Dividend Distribution Tax (DDT) whereas private limited companies in India are prone to pay DDT @ 16.609 % (including surcharge and education cess) on dividends compensated towards the shareholders.
The tax rate for LLP is 30%. The earnings shared through the partners after having to pay taxes is exempt from tax.
Let us take a look at a good example
Jack and Jill begin a LLP with 50% profit discussing together. Inside a financial year, the LLP had profit of Rs 10,00,000. The organization tax is Rs 3,00,000 (30% of profit). The total amount Rs 7,00,000 was shared between Jack (Rs 3,50,000) and Jill (Rs 3,50,000). Jack and Jill don’t have to pay tax on their own earnings.
Body Corporate
LLP and Limited information mill body corporate along with a legal entity outside of its partners and shareholders. Limited Liability Partnership, much like a private Limited company, is capable of doing getting into contracts and holding property in the own name.
LLP Agreement
LLP is organized and operates based on a contract. The LLP agreement may have the mutual legal rights, responsibilities and obligations from the partner with regards to one another along with other legally binding provisions.
Remuneration and Interest on capital
Partners are permitted to consider remuneration like a working partner, provided the LLP agreement permits.
