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Getting funding in LLP is not a good option for start-ups?

Gaurav , Last updated: 05 April 2016  

As per the available trends more and more businesses are now forming LLP which means Limited Liability Partnership. This form of business would help you enjoy lots of flexibilities. This form of business has come into existence since a few years, before that there was only a normal partnership option or a company formation. But these two things were combined and the benefits of both were merged together in this unique form of business. In this the partners would operate under limited liability and still enjoy the creative flexibility of operating the business.

Getting funding in LLP

The major disadvantage of LLP is that the business cannot raise the money from public. It cannot come out with an IPO. But the good thing is that if the smaller scale alters into larger scale, the LLP can get converted into a Company. After the company is formed, you can opt for funding.

This means that when you are a startup that has enough funds or if you have started with a smaller scale then perhaps funding would not be a problem for you. But when the startup would have bigger scale of operations in future then you will see that there would be a need to convert the LLP into corporate entity.

Decide after determining Pros and cons

It is true that as a start up you may not have an idea as to what would be the best option for you. You must look into the pros and cons of Limited Liability Partnership and then based on that you must take the final decision.

• Just look into the debt factor.
• Also check out things like the taxation options.
• You must also look into things like compliance and documentation.

When you think of the above points or research on the same you would conclude that LLP would be the best option for you. But, when you have some larger targets and you already know that in future you will have better options then it would be better to take into account that whether you want to opt for the private limited option now only or you would rather get converted later.

More and more start ups get confronted with the choice of being an LLP or a corporate entity. Every business should have an idea about the targets that they would have for the future. If the future holds a promise that there would be more expansion and more funds needed then the better decision would be to form the company from the start itself.

Find out about the pros and cons and then based on that you can think of the final decision. Of course, LLP has many benefits when you look at the features, taxation options and the debt related flexibility. But then when you find out that the funding would not be possible with this option then you must take the necessary steps further in that regards.

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