LLP registration gives you a wonderful business entity that combines all the positive traits of a company and a partnership firm. And for that very reason, every entrepreneur is now ignoring the company and jumping on the Limited liability Partnership. Is it wise to choose this business infrastructure to achieve your entrepreneurial dreams? Let’s find out the answer.
Going through the process of LLP registration is for those who want their first business entity to be a success. These individuals are not worried about the risk to their venture; but rather have concerns regarding achieving growth quickly. For this very reason, limited liability partnership registration has become a favourite for many.
However, there are some dark spots about this business entity that people ignore.
We do not know why people willfully turn a blind eye towards those issues? However, discussing them is a critical matter.
Therefore, this article shows you the causes to think twice before registering an LLP in India.
Reasons to be afraid of LLP Incorporation in India.
The following points will make you think twice before choosing a Limited Liability partnership as your business entity:
You have to disclose your financial details:
If you run a partnership firm with Limited Liability capabilities, the MCA won’t let you run your business freely. The government of India mandates that an LLP discloses the financial details for public viewing on an annual basis.
High penalty for non-compliance:
Even though the compliance requirements for an LLP are low, the penalty for not filing those compliances are high. Ministry of Corporate Affairs doesn’t show mercy to a Limited Liability Partnership that fails to file its returns properly.
Equity investment is not possible:
No concept of equity investment exists in an LLP. It removes a critical funding source for your business that could’ve expanded your enterprise.
Foreign nationals don’t have the authority:
While you can have foreign nationals in your LLP, you cannot start an LLP comprising only foreign nationals.
Partners won’t receive any tax benefit:
The government considers the income a partner earns as individual income. Therefore, you’ll need to pay taxes on an individual basis at all times. It means that you won’t be able to enjoy any tax exemptions.
It is not easy to transfer the shares among the partners:
Transferring shares in an LLP is only possible if all the partners agree. Now, you can guess that getting all the partners on the same page can be a mountainous task. Eventually, it will delay the business decisions that will have a negative impact on your business entity.
Investors do not show much interest in an LLP:
You obtain online LLP registration with a view to expanding your business. However, you should know that while it is theoretically possible, practically, it is not an easy task. The absence of equity investment doesn’t foster confidence among investors. As a result, they consider it a safe bet to stay away from your business entity.
Related Topic: Partnership Firm Registration
Conclusion
There is nothing wrong with incorporating an LLP if you know the risks that surround it. If you jump into the fray and start this business entity without the forethought of expansion and funding, you will lose. However, despite these drawbacks, there are still many who like the prospect of having an enterprise with the perks of partners and a company.
So, if you are still willing to give Limited Liability Partnership a try, call Registrationwala.
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