The Limited Liability Partnership (LLP) is legal entity under which one can enjoy the benefit of limited liabilities and general partnership. The LLPs are governed by the Limited Liability Partnership Act 2008.
It is an upgraded version of general partnership and the partners are known as Designated Partners. In LLP partners can enjoy the benefit of limited liabilities. The registration of LLP is a very simple process and is proffered most as it has lesser compliance to follow. LLPs are most recommended for professional firms, micro and small businesses that are family-owned or closely-held.
The partners in LLP have limited liability, meaning that personal assets of the partners can’t be used for paying the debts of the company. Designated partners are liable only to the extent of their contribution in the LLP mentioned in the agreement. Even if there are number of partners, each partner is liable for their own decisions not for the other partner’s misconduct. In this way, all the partners are shielded from the joint liability.
The LLP is executed between the partners and the LLP agreement determines the mutual rights, duties, and responsibilities of the partners. The LLP agreement must be printed on stamp paper and the stamp duty to be paid on the LLP agreement is depends on the state of in which the LLP is incorporated and amount of capital contribution from the partners.
Is LLP right for you to start?
If you don’t want to take responsibility or liability for another partner's misconduct, incompetence or negligence and also want to limit your liabilities for the debt and losses, also want to enjoy tax benefits. Then LLP is the best option to go with.
Funding or Borrowing Capital : It’s easy for LLP to get funding or borrow capital from banks/Financial Institutes in comparison to Sole proprietorship and Partnership type.