Limited Liability Partnership (LLP) is a relatively new type of corporate entity introduced in India in 2008-09 by the Limited Liability Partnership Act, 2008 and the Limited Liability Partnership Rules, 2009. It seeks to combine the advantages of a traditional partnership and the private limited company while seeking to reduce the disadvantages of both.
Limited Liability Partnership is ideal on account of limited liability of its partners (thereby meaning that personal assets of the partners are safe in case of business liquidation since the liability is limited only to business assets and any unpaid capital contribution.
Other advantages of a Limited Liability partnership are perpetual succession, corporate legal status, inherent flexibility, no dividend distribution taxes, no mandatory statutory audit below a certain threshold, lower compliance as compared to companies act etc. Limited Liability Partnership is also an ideal structure for start-ups, family owned businesses and micro, small and medium business enterprises because of the above mentioned advantages.
Process of forming a limited liability partnership is as follows: Name application, Obtaining Digital signatures of all proposed partners, Filing the FiLLiP form, Obtaining the certificate of incorporation, applying the PAN and TAN, Drafting the Limited Liability Partnership Deed (with adequate stamp duty) and submitting it to the jurisdictional Registrar of Companies.
With the liberalization of Foreign Direct Investment rules in India, Limited Liability Partnership has also become an attractive venue for Foreign investors, foreign multi nationals and Non-Resident Indians. After the receipt of money, the FDI and RBI reporting compliance needs to be completed.
Annual compliance for a Limited Liability partnership is Form 11 and Form 8 each year. If the turnover exceeds Rs. 40 lakhs or the capital contribution exceeds Rs. 25 lakhs, then the books of the Limited Liability Partnership need to be audited. Now one additional compliance is required every year in April about completion of the DIR-KYC.