LLP or Limited Liability at first may seem to be a really easy option as compared to forming a private limited company, but is it really so?
Before taking a long term decision and crucial decision like this you need to know what really is a Limited Liability Partnership and a Private Limited Company.
What is LLP?
Limited liability partnership is a form of organization where your firm is a separate legal entity from the partners and the partners are not liable for the unauthorized actions of other partners or their misconduct, in simpler words they are insulated from ‘joint liability’. They have perpetual succession just like any other organization form. Also, and most importantly the liability of the partners would be limited to their agreed contribution. In layman’s language: no personal assets of the partners are exposed to risk, except in case of fraud on the part of the partner.
Cost Effective: Forming a LLP requires less cost than forming a company. You can also apply for registration of LLP online. The registration cost of the LLP is determined on the basis of the capital contribution.
Taxation: LLPs are taxed in the similar manner as are the other general Partnership firms.
- Effective Tax: 30.9%
- Exempted from Surcharge of 10 %
But, LLPs pay less tax as compared to the companies.
Partners and Capital: In case of LLPs there is no restriction on the maximum no. Of partners, though minimum of 2 partners are required. Also, no minimum capital contribution in case of LLPs is there.