{"id":1864,"date":"2019-12-20T11:27:52","date_gmt":"2019-12-20T05:57:52","guid":{"rendered":"https:\/\/razorpay.com\/learn\/?p=1864"},"modified":"2024-08-21T11:09:27","modified_gmt":"2024-08-21T05:39:27","slug":"all-you-need-to-know-about-limited-liability-proprietorship","status":"publish","type":"post","link":"https:\/\/razorpay.com\/learn\/all-you-need-to-know-about-limited-liability-proprietorship\/","title":{"rendered":"All You Need to Know About Limited Liability Proprietorship"},"content":{"rendered":"<blockquote><p><span style=\"font-weight: 400;\">A limited liability proprietorship is a mix of both a partnership and a company, put together to form a single organisation. It is a formal partnership between at least two business partners. Each of the business partners is provided with limited liability, which means they do not stand responsible for any loss, debts or liabilities that the business might face. <\/span><\/p><\/blockquote>\n<p><span style=\"font-weight: 400;\">In recent times, Limited Liability Proprietorship or LLP has become one of the most preferred forms of business registration as it has elements of both a partnership firm and private company to benefit from. Read this article to understand all you need to know about LLP.<\/span><\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_80 counter-hierarchy ez-toc-counter ez-toc-transparent ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69dec5ff80aee\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69dec5ff80aee\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/razorpay.com\/learn\/all-you-need-to-know-about-limited-liability-proprietorship\/#What-is-limited-liability-proprietorship\" >What is limited liability proprietorship?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/razorpay.com\/learn\/all-you-need-to-know-about-limited-liability-proprietorship\/#What-are-the-advantages-of-LLP\" >What are the advantages of LLP?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/razorpay.com\/learn\/all-you-need-to-know-about-limited-liability-proprietorship\/#What-are-the-disadvantages-of-LLP\" >What are the disadvantages of LLP?<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/razorpay.com\/learn\/all-you-need-to-know-about-limited-liability-proprietorship\/#Documentation-requirements-for-registering-LLP\" >Documentation requirements for registering LLP<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/razorpay.com\/learn\/all-you-need-to-know-about-limited-liability-proprietorship\/#How-to-form-a-Limited-Liability-Proprietorship\" >How to form a Limited Liability Proprietorship<\/a><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"What-is-limited-liability-proprietorship\"><\/span><span style=\"font-weight: 400;\">What is limited liability proprietorship?<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">As the name suggests, a limited liability proprietorship is a mix of both a partnership and a company, put together to form a single organisation. It is a formal partnership between at least two business partners. Each of the business partners is provided with limited liability, which means they do not stand responsible for any loss, debts or liabilities that the business might face. Unlike in a partnership firm, where each partner is responsible for everything, in an LLP, each partner is accountable for their own negligence only.\u00a0<\/span><\/p>\n<h2><span class=\"ez-toc-section\" id=\"What-are-the-advantages-of-LLP\"><\/span><span style=\"font-weight: 400;\">What are the advantages of LLP?<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Wondering why should you choose LLP over other business registrations? Have a look:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><b>Easy &amp; quick to build: <\/b><span style=\"font-weight: 400;\">Building an LLP is a simple process. It does not have complicated steps and requirements and neither does it take months of waiting time. The minimum amount of fees for incorporating an LLP is INR 500 and the maximum that can be spent is INR 5,600<\/span><\/li>\n<li style=\"font-weight: 400;\"><b>Continuity in succession:<\/b><span style=\"font-weight: 400;\"> The life of the LLP is not affected by the death or retirement of any of the partners. If one of the partners withdraws because of any reasons, it does not mean that the LLP gets wound up. An LLP can only be shut down on the basis of the provisions of the Limited Liability Protection Act\u00a0 of 2008<\/span><\/li>\n<li style=\"font-weight: 400;\"><b>Limited liability: <\/b><span style=\"font-weight: 400;\">All the partners of the LLP have limited liability, which means that the partners are not liable to pay the debts of the company from their personal assets. No partner is responsible for any other partner\u2019s misbehaviour or misconduct<\/span><\/li>\n<li style=\"font-weight: 400;\"><b>Streamlines management:<\/b><span style=\"font-weight: 400;\"> All the major decisions and management activities in an LLP are taken care of by the board of directors hence the shareholders receive very less power in making decisions<\/span><\/li>\n<li style=\"font-weight: 400;\"><b>Hassle-free transfers: <\/b><span style=\"font-weight: 400;\">There are no restrictions on joining and leaving an LLP. One can easily admit as a partner and transfer the ownership to others<\/span><\/li>\n<li style=\"font-weight: 400;\"><b>Taxation benefits: <\/b><span style=\"font-weight: 400;\">An LLP is exempt from various taxes such as dividend distribution tax and minimum alternative tax. Also, the rate of tax is less when compared to other business types<\/span><\/li>\n<li style=\"font-weight: 400;\"><b>No compulsory audit requirements: <\/b><span style=\"font-weight: 400;\">There is no mandatory audit requirement for an LLP until the company exceeds the annual turnover of INR 40 lakhs<\/span><\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"What-are-the-disadvantages-of-LLP\"><\/span><span style=\"font-weight: 400;\">What are the disadvantages of LLP?<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<ul>\n<li style=\"font-weight: 400;\"><b>Not covered in all States:<\/b><span style=\"font-weight: 400;\"> In India, there are certain variations in tax benefits from State to State. There are also cases when States restrict the formation of LLP. This is one of the major disadvantages of an LLP<\/span><\/li>\n<li style=\"font-weight: 400;\"><b>Less credibility:<\/b><span style=\"font-weight: 400;\"> An LLP has many benefits but the fact is that people do not consider LLPs to be a credible business. People still trust companies or partnerships over LLPs<\/span><\/li>\n<li style=\"font-weight: 400;\"><b>Differences amongst partners: <\/b><span style=\"font-weight: 400;\">Since each partner is responsible for their own part, there are cases when partners do not consult each other before proceeding with a decision or agreement\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\"><b>Transfer of interest:<\/b><span style=\"font-weight: 400;\"> Though interest and ownership can be transferred, it usually is a long procedure. Various formalities are required to comply with the provisions of the Limited Liability Partnership Act<\/span><\/li>\n<\/ul>\n<p style=\"text-align: center;\">Also Read <em><a href=\"https:\/\/razorpay.com\/learn\/what-is-sole-proprietorship-advantage\/\" target=\"_blank\" rel=\"noopener noreferrer\">The Holy Grail of Sole Proprietorship is Here\u00a0<\/a><\/em><\/p>\n<h2><span class=\"ez-toc-section\" id=\"Documentation-requirements-for-registering-LLP\"><\/span><span style=\"font-weight: 400;\">Documentation requirements for registering LLP<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">Before you start with the procedure of <a href=\"https:\/\/razorpay.com\/rize\/company-registration\/llp\">registering an LLP<\/a> or make changes in an existing LLP, have a look at the list of documents you might need:<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Form 7 is required to obtain a Designated Partner Identification Number (DIN) while registering your LLP. It may be sought from the MCA website. Along with the duly completed form, a registration fee of INR 100 must also be paid<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Form 1\/ RUN-LLP is required to register a name for the LLP and reserve it. It may be used to christen an LLP or to alter the present name. The fee for submitting this form is Rs 10,000<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">A request must also be filed by the partners for their DSC to be registered if it hasn\u2019t already been done before<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Form 2\/FiLLiP is required for incorporating a registered LLP. This form must be sent to and acknowledged by the concerned State\u2019s Registrar<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">An LLP agreement must be made, which outlines the duties of each partner involved. This requires the filling and submitting of Form 3<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">In the case of changing, altering, adding or removing partners, the partners must submit Form 4<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Form 11 must be used to file the IT returns of the LLP<\/span><\/li>\n<\/ul>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">If the office address of the LLP is to be changed, then Form 15 must be filed<\/span><\/li>\n<\/ul>\n<h2><span class=\"ez-toc-section\" id=\"How-to-form-a-Limited-Liability-Proprietorship\"><\/span><span style=\"font-weight: 400;\">How to form a Limited Liability Proprietorship<\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p><span style=\"font-weight: 400;\">As mentioned earlier, forming an LLP is easy and quick. Before you get started, obtain a DSC or Digital Signature Certificate as the following steps will require it. File for one if you don\u2019t already have one. Further, here are the steps involved in forming an LLP. You can visit mca.gov.in and follow the steps listed below:<\/span><\/p>\n<ol>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Issue a Designated Partner Identification Number for yourself, which serves as an ID card<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">File Form 7 and pay the required fees<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Register a name for your LLP using Form 1 and pay Rs 200<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Incorporate the LLP via Form 2. The LLP agreement must also be made at this stage<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">File the LLP Agreement as per Section 2(o) of the LLP Act, 2008 using Form 3<\/span><\/li>\n<\/ol>\n<p><span style=\"font-weight: 400;\">With the above-mentioned steps, you are all set to start an LLP of your own.\u00a0<\/span><\/p>\n<h4><strong>Recommended Read<\/strong><\/h4>\n<ul>\n<li><a href=\"https:\/\/razorpay.com\/learn\/essential-e-commerce-tools-you-need-to-run-a-successful-business\/\" target=\"_blank\" rel=\"noopener noreferrer\"><em>Essential E-commerce Tools You Need to Run a Successful Business\u00a0<\/em><\/a><\/li>\n<li><em><a href=\"https:\/\/razorpay.com\/learn\/why-do-startups-fail-5-legal-aspects-startups-overlook\/\" target=\"_blank\" rel=\"noopener noreferrer\">Why Do Startups Fail? 5 Legal Aspects Startups Overlook<\/a><\/em><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>A limited liability proprietorship is a mix of both a partnership and a company, put together to form a single organisation. It is a formal partnership between at least two business partners.<\/p>\n","protected":false},"author":151156465,"featured_media":1865,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[3367,1383],"tags":[3381],"class_list":{"0":"post-1864","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business-glossary","8":"category-business","9":"tag-limited-liability-proprietorship"},"_links":{"self":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts\/1864","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/users\/151156465"}],"replies":[{"embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/comments?post=1864"}],"version-history":[{"count":9,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts\/1864\/revisions"}],"predecessor-version":[{"id":12783,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/posts\/1864\/revisions\/12783"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/media\/1865"}],"wp:attachment":[{"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/media?parent=1864"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/categories?post=1864"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/learn.razorpay.in\/learn\/wp-json\/wp\/v2\/tags?post=1864"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}