Compared to normal Partnership, an LLP (Limited Liability Partnership) can be proved as a better business setup. Excessive regulations of the Indian Act, 1932 will be removed by LLP’s whereas personal liabilities of partners are concerned in Partnership. With regards to capital contribution requirements and number of partners, there are no audit requirements below certain capital, no cap to the number of partners or contributions of capital and including several tax benefits.
LLP is considered a legal entity and authorized person established under the act. Thus, it has large legal capacity, can own a property and incur liabilities. Liability from the partners of LLP is not given to the creditors of LLP.
LLP remains in existence until it gets legally dissolved because it has perpetual succession. Death or departure of any partner will not affect the LLP as it is a separate legal person. Regardless of any modifications in ownership, LLP remains in continuation or uninterrupted existence.
Easy transfer of Ownership is allowed by inducting a person as a partner of LLP. As LLP acts as a separate legal entity, which is separate from its partners, the easy process of transferring ownership to a particular individual is possible. Therefore, changes in the ownership of the LLP happen due to changing the partners.
LLPs are considered to be the ideal business structure for small businesses and startups due to the minimal compliance requirements as they do not require an audit if they have less than Rs. 25 lakhs of capital contribution and less than Rs. 40 lakhs of turnover.
If the LLP has less than 40 lakhs of turnover and less than 25 lakhs of capital contribution, it will not require an audit. Therefore, they are considered to be ideal for start-ups and small businesses.
LLP can own, obtain and trade property in its name, being an artificial authorized individual. As long as LLP is an ongoing consent, partners cannot make a claim on the property owner by the LLP.