When people decide to start a business by partnering with someone, they usually register the business only as a regular partnership.
Many are unaware that they can actually form a Limited Liability Partnership (LLP) that will benefit them much more than the regular partnership. So, how beneficial is it to register as an LLP? In this post, we look at three specific ways LLP outshines regular partnership firms.
Limited Liability
As the name Limited Liability Partnership suggests, the partners only have a limited liability as far as the business is concerned. Therefore, the creditors have no legal authority to sue for a partner’s personal property in case the LLP is unable to pay off the creditor’s debt in full from its own funds. In complete contrast, if you had operated the business as a regular partnership, then your personal assets like land holdings, bank account, jewelry would also have been taken away by the creditors for clearing the debt incurred by the business. So, for people who want to keep their personal assets safe from business creditors, but do not want to register as a private company, the LLP option offers the best of both worlds.
No Partner Limits
In a traditional partnership, the number of partners is limited to 20. So what do you do when you need more partners than that? Unfortunately, you cannot do anything and will be stuck with only 20 partners. At best, you can introduce a new partner by removing an existing partner. But that’s it. An LLP has no such restrictions. You can bring in any number of partners you want, whether it is 50, 100 or 500. As such, if you envision your business as having more than 20 partners, then you should definitely choose to register the partnership as an LLP.
Foreign Direct Investment (FDI)
If you expect to receive FDI into the partnership, then LLP is again a better choice. Though it had a few limitations earlier, the Indian government relaxed their stand on FDI in 2015. As a result, you can now receive up to 100% FDI through the automatic route. Plus, certain conditions that linked the FDI with performance have also been lifted.
One drawback of LLP is that you cannot convert it into a private limited company in future should you wish to. So, if you have such plans, then an LLP may not be the right choice for you. In such situations, it is ideal to register the business as a company right away. And you can register your company by Quickcompany.in to make the entire process easier. But if you are not looking at converting the business to a private company, then registering the partnership as an LLP is the best thing you can do.
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