LLP

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Alok Swarup Gupta`

Alok Swarup Gupta` (Querist)

17 July 2016 kindly tell me what that if someone is starting business which option is better a pvt ltd co or a limited liability partnership. And what are the pros and cons for a llp? thank you

CS Mitesh Mehta

CS Mitesh Mehta (Expert)

18 July 2016 According to my view LLP is better option due to follwing.
1. it is very easy to form LLP, as the process is very simple as compared to Companies and does not involve much formality
2. LLP Act 2008 gives LLP the at most freedom to manage its own affairs. Partner can decide the way they want to run and manage the LLP, in form of LLP Agreement.
3. It is easy to become a Partner or leave the LLP or otherwise it is easier to transfer the ownership in accordance with the terms of the LLP Agreement.
4. A LLP as legal entity is capable of owning its funds and other properties. The LLP is the real person in which all the property is vested and by which it is controlled, managed and disposed off. The property of LLP is not the property of its partners. Therefore partners cannot make any claim on the property in case of any dispute among themselves.
5. Another main benefit of incorporation is the taxation of a LLP. LLP are taxed at a lower rate as compared to Company. Moreover, LLP are also not subject to Dividend Distribution Tax as compared to company, so there will not be any tax while you distribute profit to your partners.
6. Financing a small business like sole proprietorship or partnership can be difficult at times. A LLP being a regulated entity like company can attract finance from PE Investors, financial institutions etc.
7. Under LLP, only in case of business, where the annual turnover/contribution exceeds Rs 40 Lacs/Rs 25 Lacs are required to get their account audited annually by a chartered accountant. This provides great relief to small businessmen.
8. As compared to a private company, the number of compliances are on lesser side in case of LLP.

Disadvantage

1. LLP cannot raise funds from Public
2. Any act of the partner without the other may bind the LLP.
3. Under some cases, liability may extend to personal assets of partners.
4. No separation of Management from owners

Alok Swarup Gupta`

Alok Swarup Gupta` (Querist)

19 July 2016 thankyou sir

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