LLP Registration for Small Business: Simplified Procedure
Aaryan Mishra
February 13, 2024 at 07:15 AM
In todays world, choosing a business structure is very important for the terms of the business. The LLP registration process for small business, is an important step keeping in minds the benefits and considerations for the business owners. It is chosen by the business owners who want to have operational flexibility as well as limited liability, the personal assets in protected and also on top of it no minimum capital contribution is necessary to start the business, with this business structure. In this blog, we would be discussing the registration process in a very simplified manner so as to understand the process and the compliance, and the business owners are aware and have an idea of things like- liabilities, taxing, minimum capital required as well how it operates on a day to day basis.
Documents required for LLP registration for small business
There are certain requirement for LLP registration for Small Business which are required to keep in mind;
- There is no minimum capital requirement
- Your personal assets are safe in case of business debts
- No taxing until there is a minimum turnover, only annual income tax returns filed
- You being the owner, can manage the company, it is not the case in certain big corporations, the owners choose different people to manage the company generally, this is not compulsory , this is as per the business structure of big corporation which is known as in legal terms- Private Limited Company.
- Acts, as separate legal entity, a separate person, different identity from those of its partners who are running it
- Attracting Investors to this business structure is not easy which is a disadvantage with comes with the benefits.
- You, as an individual need to have a partner to conduct business minium of two partners, you might be doubting for the person, if the person lasts during longer duration or not, so one thing that you need to know that an LLP is unbothered by the change in its partners.
- One partner can run, in cases when partner leaves, dies or diminishes due to any reason the business until, by taking the sole liability but this period can lost for 6 months .
- You need to take the help of a legal professional for drafting one of the most important legal documents that is an LLP Agreement, which contains all the terms and conditions in which the business would be operated and how the profit-sharing and other things that need to be done.
Now, with these you may have doubts where are these rules and regulations generated from so they are generated from the governing laws and acts which are as follows:
- Limited Liability Partnership Act, 2008
- Limited Liability Partnerhsip Rule, 2008
- LLP Agreement, what is drafted and what terms are mentioned by the legal professionals after consulting you.
Which section of the act provides these, you can refer the points as per the way that they are numbered as a), b)…
- Not mentioned in any section specifically, that a capital investment is needed hence , it is interpreted from the LLP Act , that there is no minimum capital needed.
- ..
- Section 10(1), permits about this taxing feature
- Section 7 of the LLP Act, 2008 talks about this feature.
- Section 3 of the LLP Act, 2008 talks about this feature.
- It is a practical consideration, not mentioend specifically in the LLP Act
- Section 6(1) of the Act, 2008 mentions about this feature.
- Section 24(4) provides the feature of being unbothered by change in partnership;Section 24(3) , allows for this feature to run as sole partner with sole liability
- Section 23 of the LLP Agreement, discusses this in detail.
Conclusion
In Conclusion, the procedure and the steps to get an LLP Registration for Small Business reveals a strategic pathway and having clear vision of the roles, and the purpose of this business.
Certain, facts like the flexibility, liability, and taxing structure makes this business structure one of the most appropriate structure who wants to have the benefits that have been stated. Hence, this is the simplified business structure that one needs to understand while considering the LLP structure of business for their company registration.
FAQs
- Reasons why small business would choose LLP structure for their business?
An LLP is a flexible structure that provides, benefits which arent provided in other forms of business, you should choose LLP structure if the needs of your business match with the feature of this business structure.
- Is LLP suitable for all types of small business?
An LLP is flexible, it depends upon the nature of the business.Because business structure , influences the direction of the business in the longer term.
- How does LLP help in protecting the personal assets?
LLP has Limited Liability Protection, it means the partners are liable to the extent of their contribution in the capital contribution hence, their personal assets other than contributions are safe.
- Can, LLP switch from one structure to another structure of business?
Yes, one can switch from one business structure to another, this can happen when there are change in terms of the business or they have attracted investors or any change in business which the current LLP structure doesnt suit.
- Can LLP be dissolved if business ceases to exist?
Yes, an LLP can be dissolved after the business cease to exist. An LLP can become insolvent if the partners in the business choose to dissolve.
- Biggest disadvantage of having LLP structure of business?
Investors do not choose to invest in such type of businesses, is one of the biggest disadvantages.
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