Why are small businesses nowadays more focused on obtaining LLP Registration?

swaritadvisors (25)in #llp-registration • 6 years ago (edited)

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In today’s competitive world, it’s easy to start a business but quite difficult to carry on. Undoubtedly, company registration is an easy task but choosing the form of business structure is not that simple. Until you understand the significance of each and every kind clearly you couldn’t conclude which business entity would be the best for you.

Well, everything depends on your needs and the resources you have. On one hand, the formation of some companies requires almost no capital and you can even start with only two rupees in your pocket. But, on other hands, there are some businesses that can’t be even registered if you have don’t have a certain amount of capital in your bank account.

We are sure that you are very much familiar of Partnership Firm. Correct? If yes, then understanding LLP registration won’t be that tough because it’s nothing but solely an upgraded version of Partnership Firm.

What is meant by LLP?

LLP stands for Limited Liability Partnership and has now become one of the most loved choices among the entrepreneurs and start-ups in India. The biggest reason behind its popularity is that it covers the advantages of both limited company and partnership firm into a single form of organization.

Generally, small businesses are more focused on this kind of business structure and those who aren’t willing for venture funding in business.

Limited Liability Partnership Registration in India

LLP firm is registered under Limited Liability Partnership Act, 2008 and was enacted by the Legislature with a motive to introduce a business form that can be easily managed and still carries the benefits of limited liability and better credibility.

The moment LLP registration came into effect, it gathered tremendous popularity as it possesses the best of both business structures.

Who should obtain LLP Registration?

All the small and medium scale businesses can opt for limited liability partnership registration. Additionally, those who are family-based or other closely held businesses opt for limited liability partnership registration.

Apart from these, if you plan to raise capital in the future, LLP registration won’t be recommended for you since LLPs are not authorized to issue equity capital. And therefore, it is very difficult to raise venture funds after Limited Liability registration in India.

Reasons small businesses are opting for LLP registration

As already discussed above, limited liability partnership firms have advantages of both partnership firm and companies. Besides that, there are several other authentic benefits of LLP that will surely let you think at least once before obtaining any other form of registration in India. Let’s figure out the benefits of LLP:

No minimum capital required

As against other forms of businesses, you do not require minimum capital in Limited Liability Partnership. You can just begin with the least possible capital. Furthermore, the contribution of a partner can consist of tangible, movable or immovable or intangible property or other advantages to the LLP.

Regulatory compliances are fewer

The greatest reason why people, especially start-ups and small businesses in India opt for LLP registration is that it has less compliance as compared to that of private or public limited companies. Moreover, you don’t require any audit by a Chartered Accountant if you are an LLP and your turnover is less than Rs. 40 lakhs and capital contribution are not above Rs. 25 lakhs.

Tax exemption

Tax is something that everybody wants to escape of because nobody likes to contribute a part of his/her income to others. In a limited liability partnership, partners are eligible for providing loans to an LLP and LLP can offer loans to its partners. There isn’t any limitation or restriction in receiving or providing loans. In a private limited company, if you want to avail your profit from the profits in business, then you would have to pay the dividend distribution tax. However, in LLP, you are completely exempted from paying the dividend distribution tax and that’s the biggest reason why you should opt for LLP registration.

Personal assets aren’t at risk

‘Limited liability’ is the term that itself explains why people can prefer LLP registration. Since LLP has limited liability and its partners’ contributions are limited to their firm only, therefore, in case of any loss or financial distress, the personal assets of partners won’t be at any risk of being seized or confiscated by the government, creditors, and banks.

Easy transferability

It’s easy to transfer the ownership of an LLP to another person by inducting them as a Partner of the LLP. Limited liability partnership is a separate legal entity from its partners; hence, by changing the partners, the ownership of the LLP can be changed.

Final words

Apart from the above-described benefits, LLP Registration has several other advantages as well. There isn’t any significant separate treatment for the owner and manager, it is easy to wind-up LLP, establishment cost of LLP is fairly low, etc.

Hence, if you’re contented with the benefits of Limited Liability Partnership Registration, then you can contact Swarit Advisors for registering your business as LLP. We will ensure the smooth registration process.