A limited liability partnership (LLP) in india is similar to a general partnership, except the partners are not personally liable for negligent acts conducted by other partners or employees not under their supervision. This is different from a general partnership, in which each partner is liable for the debts and obligations of the business as well as the malpractice of any other partner. Income taxes in an LLP are passed through the business and reflected on the partners’ individual tax returns. Because of the limited liability of each partner and pass-through tax status, LLPs are a very popular business structure.

Likely usersof the LLP
India has witnessed considerable growth in services sector and the quality of our professionals is acknowledged internationally. It is necessary that entrepreneurship knowledge and risk capital combine to provide a further impetus to our impressive economic growth. Equally the services sector promises an economic opportunity similar to that provided by information technology over the past few years. It is likely that in the years to come Indian professionals would be providing accountancy, legal and various other professional/technical services to a large number of entities across the globe. Such services would require multidisciplinary combinations that would offer a menu of solutions to international clients. In view of all this, the LLP framework could be used for many enterprises, such as:

• Persons providing services of any kind
• Enterprises in new knowledge and technology based fields where the corporate form is not suited.
• For
  professionals such as Chartered Accountants (CAs), Cost and Works Accountants (CWAs), Company Secretaries (CSs) and Advocates, etc.
• Venture capital funds where risk capital combines with knowledge and expertise.
• 
  Professionals and enterprises engaged in any scientific, technical or artistic discipline, for any activity relating to research production, design and provision of services.
• Small Sector Enterprises (including Micro, Small and Medium Enterprises)
• Producer Companies in Handloom, Handicrafts sector.

Difference between LLP & “traditional partnership firm”

• Under “traditional partnership firm”, every partner is liable, jointly with all the other partners and also severally for all acts of the firm done while he is a partner.
• Under LLP structure, liability of the partner is limited to his agreed contribution. Further,no partner is liable on account of the independent or un-authorized acts of other partners,thus allowing individual partners to be shielded from joint liability created by another partner’s wrongful acts or misconduct.

Difference between LLP & a Company

• A basic difference between an LLP and a joint stock company lies in that the internal
• governance structure of a company is regulated by statute (i.e. Companies Act, 1956)
• whereas for an LLP it would be by a contractual agreement between partners.
• The management-ownership divide inherent in a company is not there in a limited
• liability partnership.
• LLP will have more flexibility as compared to a company.
• LLP will have lesser compliance requirements as compared to a company.

Conclusion of LLP India

• LLP is an alternative corporate
  business form that gives the benefits of limited liability of a company and the flexibility of a partnership.
• The LLP can continue its existence irrespective of changes in partners. It is capable of entering into contracts and holding property in its own name.
• The LLP is a separate legal entity, is liable to the full extent of its assets but liability of
  the partners is limited to their agreed contribution in the LLP.
• Further, no partner is liable on account of the independent or un-authorized actions of other partners, thus individual partners are shielded from joint liability created by another artner’s wrongful
  business decisions or misconduct.
• Mutual rights and duties of
  the partners within a LLP are governed by an agreement between
  the partners or between
  the partners and the LLP as the case may be. The LLP, however, is not relieved of the liability for its other obligations as a separate entity.
• Since LLP contains elements of both ‘a corporate structure’ as well as ‘a partnership firm structure’ LLP is called a hybrid between a company and a partnership

Opening a Limited Liability Partnership in India (LLP)

Is LLP better than private limited company ?

is llp better than private limited company the choice is yours when you are starting a new business..

however there are so many advantages of starting a limited liability partnership than a private limited company in india.

below you can find a small check-list which shows the comparison of the two forms of companies. if you need any help please do call us : ONLINE LLP – +91-9900512394

Which is best for you LLP or LTD ?
Requirements	LLP	LTD
Use partner’s tax allowances
Employ non-professional staff
Run a large PAYE scheme
Be taxed as self-employed
Limit the liability of professional partners
Hold shares in another business
Maintain a steady business for a small or fixed number of partners
Expand the business and employ many people
Manufacturing/distribution business
Profession *
Sell shares in the business
*Many professions allow and use the LTD format. Either is possible, but the LLP format was originally intended to meet the needs of the professions.

What are LLPs for?

The ‘Limited Liability Partnership” (LLP) format of registered company was originally created to enable the professions to take advantage of limited liability, but its popularity is growing among a much wider range of business.

What officers does an LLP have?

A limited liability partnership does not have Directors or a Company Secretary, but it must have at least two designated members who stand as the company’s primary representatives in much the same way as Directors.

What rules are there for LLPs?

The LLP is subject to many of the same rules as a traditional “private company limited by shares”, for instance the LLP must report changes to its registered details (including members names and addresses), it must complete an Annual Return and it must file Accounts each year.

An LLP must have at least 2 Members (Partners).

What are the trading rules for LLPs?

LLPs must be formed for active trading – they cannot be registered as dormant. A statement on the Companies House forms for LLP registration confirms that the registrants are joining in business for the purpose of making a profit. That excludes non-profit enterprises (such as clubs or charities) and it also excludes non-trading companies (”dormant companies”).

Are there tax related benefits to having either an LLP or and LTD?

The key difference that affects the view of many start-up businesses is the tax treatment of the owners (members). In a traditional LTD the Directors (who are also usually the sole shareholders in a start-up company) are treated as employees of their own company. This means that their salary is subject to personal Income Tax and National Insurance and employers’ NI contributions. Profits left in the company (not withdrawn as salary) are subject to the (lower) Corporation Tax rate.

The members of an LLP pay Income Tax as self-employed persons, so there is no employers’ NI to pay. On the other hand, ALL the profits of the company are regarded as the members’ income and are subject to Income Tax.
So the balance of tax advantage depends on how much profit the company might make and how much the owners pay themselves.

Will the number of employees we expect to have affect my choice of LLP or LTD?

If the company expects to employ people and the employee’s payroll is likely to be higher than the owners’ salary, a “private company limited by shares” may well be more tax efficient that an “limited liability partnership”.
If the business is likely to remain as just two or three members who are each making a similar contribution and each draw similar salaries then the LLP option will probably be more tax efficient.
It is wise to discuss the options with your tax accountant.

Will there be any problems if I plan to sell the business at some stage?

One other important factor should be weighed in the balance: how likely is it that the business will be sold as a going concern? A “private company limited by shares” (LTD) is more anonymous and easier to separate from the owners by means of transferring the shares. A partnership is more personal and therefore less straght-forward to separate from the owners.

Which is better – an LLP or an LTD?

There is no absolute rule that makes one format better than the other. In any case, if your business changes over the years so that the alternative format becomes more appropriate, it is possible to form a new company of the other type – then transfer the business over to the new company.

Procedure for converting partnership firm or private limited company to LLP

PARTNERSHIP firms to LLP

the precondition for conversion for your partnership firm are:

* Partnership should be a registered under Indian partnership Act 1932
* All the partners of existing firm should compulsorily become the partners of LLP
* Minimum 2 partners as Designated Partners and one of them should be Resident in India
* Digital Signature Certificate for one of the Designated Partners
* LLP (Limited Liability Parnership) Name
* LLP (Limited Liability Parnership) Agreement
* Registered Office for the existing partnership firm

Procedure for conversion

* Obtain name approval for LLP (Limited Liability Parnership)
* Application for conversion of firm to LLP in Form 17
* File the following forms along with a statement by all partners with registration number and date of registration of the firm.
Form 2 : Details of partners, registered office etc
Form 4 : Consent of Partners – Consent of each partner to become a partner of Liability Partnership
Form 3 : LLP agreement – this can be filed with in 30 days from the date of registration
* After verification, registrar will register all documents and issue Certificate of registration
* Upon registration of LLP, file an intimation to the Registrar of Firms stating the fact that firm is converted into LLP

PRIVATE LIMITED COMPANY to LLP
Preconditions for conversion

* The company should be registered under Companies Act, 1956
* There should not be any security interest subsisting on the assets of the company at the time of application
* Partners of LLP should comprise all the shareholders of the company and no one else.
* Minimum 2 partners as Designated Partners and one of them should be resident in India
* Digital Signature Certificate for one of the Designated Partners
* LLP (Limited Liability Parnership) Name
* LLP (Limited Liability Parnership) Agreement
* Registered Office

Procedure

* Obtain name approval for LLP (Limited Liability Parnership)
* Application for conversion of firm to LLP in Form 18
* File the following forms along with a statement by all partners with registration
* number and date of registration of the firm.
Form 2 : Details of partners, registered office etc
Form 4 : Consent of Partners – Consent of each partner to become a partner of Liability Partnership
Form 3 : LLP agreement – this can be filed with in 30 days from the date of registration
* After verification, registrar will register all documents and issue Certificate of registration
* Up on registration of LLP, file an intimation to the Registrar of Companies in Form 14 stating the fact that the company is converted into LLP

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