Private Limited Company is a very deep rooted and well-liked business type in India. It is also relied upon since a very long time. However this article talks about one of the newest business forms, the Limited Liability Partnership (LLP).
It is a commercial business, offering dual advantages, the benefits of a company and flexibility of a partnership firm, such as limited liability, advantages in taxes, and is also considerably cheaper to begin and sustain.
So if you are still confused over your choice of business, you are at the right place.
In this article we bring to you the benefits of LLP over private limited company from the Grass Root level:
1. Number of owners.
A private limited company restricts the maximum number of directors to 200, while the only specification in a LLP is that it requires minimum 2 designated partners.
There is no limit on maximum designated partners.
Contrasting the norms of a company the LLPs have no minimum capital requirements.
An LLP is this easy to form.
Adding to the amazement is that the contribution of a partner may be in terms of tangible, intangible, movable or immovable property or in the form of any other benefits to the LLP.
3. Lower cost of Formation
The cost of registering LLP is significantly lower as compared to that of incorporating a private limited company.
At the initial stage of business, it is not always possible to have large amount of money.
Thus the LLPs keep their registration cost as low as possible to make it convenient for the budding entrepreneurs.
4. No requirement of compulsory Audit
Getting the accounts audited is a major and mandatory practice in all the companies be it public or private company.
However, the case is not so with LLP.
A Limited Liability Partnership is required to get the audit done only if its contributions exceed Rs. 25 Lakhs, or if it's annual turnover exceeds Rs. 40 Lakhs.
5. Taxation Aspect on LLP
LLPs and Partnership firms sail in the same boat in the case of income tax.
Thus, LLP has to pay income tax, though the share of the partners in LLP is not liable to tax.
Which means, in case of a company, if the directors withdraw the profits, an added tax in the form of DDT is payable by company.
However, no such tax is payable in the case of LLP and thus the partners have an easy access to the profits.
Also the provision of 'deemed dividend' under income tax law, is not applicable to LLP.
If you have any doubts or question after reading the article, feel free to contact us at eFilingPortal.inYour service is our motive.
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