Limited Liability Partnership (LLP)

• A Limited Liabilty Partnership firm (LLP) is a hybrid structure between a partnership firm & a private limited company where the business is carried out in a corporate framework, guided by terms of the mutually adopted partnership deed.

• • Liability- In a general partnership firm, partners are personally liable for debts of the business which means that even their personal property may be used to settle the firm’s debts. Whereas, the liability of partners is limited in case of an LLP.
  • Immunity against wrong doings of other partners- Under LLP structure, partners are not responsible for negligence or misconduct of other partners whereas in general partnership firms, partners can be held responsible.

• • Both general partnerships and LLPs are taxed at flat rate of 30%.
  • All the other income tax act provisions apply similarly except that general partnership firms are covered under presumptive taxation scheme i.e if turnover is below Rs. 2 crore in business or Rs. 50 lakh in case of profession, there is no need to maintain books of accounts or get accounts audited whereas, LLPs are explicitly not covered.

There is no minimum capital contribution requirement. It can be registered even with Rs. 100 as total capital contribution.

• • Accounts of an LLP are required to be audited when the turnover is Rs. 40 lakh or more or when the total capital contribution is Rs. 25 lakh or more.
  • The auditor of an LLP is appointed annually by the designated partners.
  • The first auditor is appointed before the end of the financial year. Subsequent appointment or reappointment of the auditors is made one month before the closing of the financial year by the designated partners.

Due to recent changes on MCA portal, incorporation of LLP can only proceed after 2nd October 2018 if any of the partners do not have DIN / DPIN.