The following are advantages of incorporating an LLP in India:
No requirement of minimum contribution
There is no minimum capital requirement in LLP. An LLP can be formed with the least possible capital. Moreover, the contribution of a partner can consist of tangible, movable or immovable or intangible property or other benefits to the LLP.
No limit on owners of the business
An LLP requires a minimum of 2 partners while there is no limit on the maximum number of partners. This is in contrast to a private limited company wherein there is a restriction of not having more than 200 members.
Lower registration cost
The cost of registering LLP is low as compared to the cost of incorporating a private limited or a public limited company. However, the difference in the cost of registering an LLP vs Private Limited Company has come down in recent days.
For example, an LLP can be registered through IndiaFiling for Rs.7899. A company can also be registered through IndiaFilings for Rs.7899.
No requirement of compulsory Audit
All companies, whether private or public, irrespective of their share capital, are required to get their accounts audited. But in case of LLP, there is no such mandatory requirement. This is perceived to be a significant compliance benefit. A Limited Liability Partnership is required to get the tax audit done only in the case that:- The contributions of the LLP exceeds Rs. 25 Lakhs, or
The annual turnover of the LLP exceeds Rs. 40 Lakhs
Taxation Aspect on LLP
For income tax purpose, LLP is treated on a par with partnership firms. Thus, LLP is liable for payment of income tax and share of its partners in LLP is not liable to tax. Thus no dividend distribution tax is payable. Provision of ‘deemed dividend’ under income tax law, is not applicable to LLP. Section 40(b): Interest to partners, any payment of salary, bonus, commission or remuneration allowed as deduction.
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