ALL ABOUT LIMITED LIABILITY PARTNERSHIP
Many business structures are based on partnerships as multiple partners can own one company. Firms, industries, business corporations etc. all are mostly structured as partnerships. Business partners are the co-owners of any business entity. All the partners of a company have responsibilities and merely the owners are legally liable for the financial status of a limited liability partnership but not in entirety. A private company whose owners are partially responsible for the debts of the company in which they invested only according to the amount of capital that was invested by them in the first place is called as a limited liability partnership.
CHARACTERISTICS OF LIMITED LIABILITY PARTNERSHIP FIRMS
- Legal entity :
A limited liability partnership is a separate legal entity which is completely liable for its assets. But the liability of its partners is very limited. It only depends on the amount of capital investment they have done in the concerned company. The individual partners involved in the limited liability partnership are not the sole creditors of the limited liability partnership.
- Agency :
One individual partner of a limited liability partnership can take any action and it might be unauthorized. These independent actions by one of the partners of a limited liability company do not have an impact on the other partners. It simply means that one partner’s actions do not make the other partner liable or bound in any legal way.
- Legal person’s status :
A limited liability partnership is an artificial legal person when it comes to the legal proceedings and functions of the company. A proper legal purpose makes this legal entity which is used for all the legal processes and it also has all the rights of a proper individual. This artificial legal person is invisible and intangible but it exists only on paper and not in real for. This is one of the most salient characteristics of a limited liability partnership which no other kind of company does not have.
- Number of partners :
A limited liability partnership can have as many partners as it can accommodate. But the lower limit of the partners has been set at 2. So, this characteristic is also important for a limited liability partnership. It needs to have at least 2 partners but a limited liability company can have as many partners it wishes to have. One of these partners are required to be of Indian origin and they must be able to reproduce their proof of residence in India.
- Dissolving the company :
A limited liability partnership is easy to dissolve at is has a lot of flexibility without imposing any detailed legal requirements. The flexible capital structure and the limited liability to all the partners. The limited liability partnership companies are very organised and that is why they are very easy to dissolve.
DOCUMENTS REQUIRED FOR REGISTERING FOR A LIMITED LIABILITY COMPANY IN INDIA
- ID proof :
The proposed partners of a limited liability partnership are required to provide their PAN card as an identity proof at the time of filing for registration of a limited liability partnership. The primary Identity document is a PAN card. The registration for a limited liability partnership will not be complete unless all the proposed partners provide the government with their respective PAN cards.
- Residence proof :
An electricity bill, phone bill, bank statement and other such documents scan act as a proof of residence for a person. These particular documents or at least one of them are required to be submitted while registering for a limited liability partnership. All the partners of the company are asked to submit their proofs of residence.
- Address proof :
A voter ID, Passport, Aadhar card or a driver’s license all are considered
as the mandatory documents in order to verify their address. This is an essential step for all the proposed partners of any limited liability partnership.
- Passport size Photographs :
A passport-sized photograph of all the partners on a white background is also to be submitted as the officials need to verify them with all your other documents before approving the concerned limited liability partnership.
- Passport :
Passport is essential for those people involved in the limited liability partnership companies who are not Indian residentials. NRIs or people with foreign residential proofs need to have their passport verified while filing for the approval of a limited liability company.
- Digital certificate :
The digital signature certificate needs to be opted for by any one of the partners applying for the limited liability partnership status. This will ensure that all the documents and required applications are easily signed online by using the digital signature. Digital signature certificate is also another important document which comes in handy while going through this long procedure.
- Registered Official address :
An office location needs to be registered during the registration process of a limited liability partnership within 30 days of its successful incorporation. A no-objection certificate is also to be attached along with all the other documents which ensure that the landlord does not have any issues regarding the fact that the place is being used as a registered limited liability company’s office.
PROCEDURE TO REGISTER PARTNERSHIP FIRMS
- Choose an appropriate name for the limited liability partnership and keep in mind the rules provided by the government authorities. Some words like the corporation and incorporated are not allowed to use according to the guidelines provided to register for a limited liability partnership. LLC should be used as the suffix in whichever name you are choosing for your company. The name can not be the same as the name of any other limited liability partnership registered before.
- Public Notice :
A public notice in the newspaper declaring about the registration of your limited liability partnership has to be published and is a necessary step. But these rules vary from state to state. So, first of all make yourself aware about the various regulations and then only take this step.
- Organisation form :
The secretary of state demands an appropriate submission of articles of organisation form as part of the process of registering for a limited liability partnership. After submitting the organization form successfully, the process of making your company visible in the market is started.
- Director Identification Number :
A provisional DIN is to be made while registering for a limited liability partnership. An online form containing the name, DOB, nationality and other such details are to be submitted by the applicants in order to gain the director identification number. Then, the regularization of this provisional director identification number is proceeded with. After the successful registration of all the documents, a limited liability partnership can be incorporated in 15-30 days.
ADVANTAGES OF LIMITED LIABILITY PARTNERSHIPS
- Asset security :
The people or private entities who own the shares of a limited liability company are in no manner completely responsible for the debts and lawsuits of the company. So in case of bankruptcy, legal cases or debt overload, the shareholders or the owners have no loss in it as they are not liable to the company.
- Tax :
The limited liability partnership companies have to go through pass-through taxation when the income is to be applied for compulsory taxation. Now, the process of filing the income tax by the limited liability partnership is not straightforward. The profits made by the limited liability company go directly to its owners who then have to file for income tax by showing profit as their personal income. This ensures that the income tax is only levied upon once in all legality. In most corporations, they have to file for double taxation that is, the profits made by the company are taxed and then distributed to the shareholders who again have to file them for personal income tax. This loss in terms of taxation is saved in a limited liability partnership as the income tax has to be filed only one.
- Adjustability :
The ownership status and the distribution of workload and power is very flexible in a Limited liability partnership company. Very few rules and regulations exist which tighten this system of management in a limited liability partnership.here are two possible pathways through which a Limited liability partnership can choose to be taxed as. These two kinds are S-corp or C-corp from which an LLC can opt one kind.
- Presence :
A limited liability partnership can continue to exist in a legal form even after the death, quitting or retirement of any of its partners, single or multiple. Other partnership firms can not do this kind of thing but this is one major benefit of being a part of a limited liability company.
DISADVANTAGES OF LIMITED LIABILITY PARTNERSHIPS
- Public record :
Financial records related to the limited liability partnership are to be submitted for the public records. These accounts tend to make the information about the personal incomes of the partners public which may or may not be comfortable for all the partners.
- Quick dissolution :
As the minimum number of partners of a limited liability partnership is 2 and one decides to leave the company or take retirement, then the limited liability partnership might dissolve without having any backup.
- Addresses to be made public :
Residential addresses used to be recorded at Companies House. Whilst the use of ‘service addresses’ now allows for home addresses to be kept out of public view, any address previously supplied to Companies House is still part of the public record unless you pay for the records to be suppressed. So, the addresses of the partners of a limited liability partnership are sometimes made public without them knowing.