When you compare a private or public limited company with a partnership firm the latter has numerous benefits. There are numerous benefits arising from registration of LLP and they are explained below.
- Limited liability- when it is a LLP so single partner would be responsible for the misconduct of the other person. Even the personal liability arising from the incompetence of one partner, would be limited to cash transactions that is made by the partner.
- Formation costs are reasonable- a major benefit of a LLP is the costs involved. If you consider the cost of forming a LLP with a private or public limited company it is bound to be less.
- Auditing forms are relaxed- the auditing forms are relaxed if you draw a comparison with private limited companies. A limited liability company is not required to audit their books till the point the turnover is above 40 lakhs.
- Convenient- the process to start a LLP is easy as they would be customized so as to cope up with the needs of the partners. In terms of annual meeting, legal compilation there are less protocols to be followed when you compare it to a private or public limited company.
- DDT is not applicable- if the partners of a LLP plan to withdraw profits from the company, an additional form of liability in the form of DDT is not liable on the partners. On the other hand the owners have to pay DDT that includes 15 % surcharge and other taxes. Coming to the profit of a LLP it is in the hands of partners and the partners may be able to withdraw it easily.
- Savings emerging from lower burden on compliance- during LLP registration Online it is a common occurrence that there is bound to be less compliance burden. A reason for the same is that you need to submit only a couple of tax statements. One is an annual statement of accounts and other would be solvency. When it is the case of a private limited company 8 to 10 compliance compliances and formalities are necessary which have to be duly completed. You need to be aware that it is a core place where all the functions are conducted and along with it you keep the important documents.
- LLP and taxation impact- LLP is not subject to any form of tax based on share and income of the partner. Under section 40( b) no form of dividend taxation is payable. Commission, remuneration , bonus or payment of salaries is subject to salary deduction. Even the provision of deemed under the income tax act would not be applicable to LLP.
- No limit when it comes to the number of owners- a LLP would be having partners that vary from 2 to many as there is no limit when it comes to the number of partners. On the other hand a private limited company there is bound to be a restriction of not having more than 200 members.
So it is quite clear that a LLP has numerous benefits in comparison to a private limited company. There are various consultants who will guide you on the road ahead.
