Advantage of Limited Liability Partnership (LLP):
Lesser compliance: LLPs have fewer compliance requirements compared to companies. For instance, an LLP does not need to appoint a statutory auditor until its turnover exceeds forty lakhs or its contribution exceeds twenty lakh rupees in any financial year. Additionally, there is no requirement to file a business commencement form, acceptance of borrowings, or a form in respect of payments due to MSMEs. LLP closure is also straightforward.
Lesser Cost of Compliance: The registration cost for an LLP is lower than that of a company. Even the statutory cost of closure of an LLP is Rs. 500/-, whereas, in the case of a company, it is Rs. 10,000/-. The fees for filing certain LLP forms are also lower compared to a company.
Compliances for LLPs: Mandatory compliances for LLPs include filing of Form 11 - Annual Return of Company, filing of Form 8 - Statement of Accounts & Solvency, Designated Partner’s KYC, and filing of Income Tax Return of LLP.
Non-Applicability of Dividend Distribution Tax: Unlike companies, LLPs do not have to pay tax on dividends when owners withdraw profits. No dividend distribution tax (DDT) is applicable to LLPs, and partners can easily withdraw profits.
Allowance of Deduction in Income Tax: Remuneration and interest paid to partners are allowed as deductions while calculating the net turnover of the LLP if paid within the limits prescribed in the Income Tax Act, 1961.
No Minimum Contribution Requirement: LLPs can be founded with the least amount of capital possible because there is no minimum capital requirement. Partners' contributions to the LLP may take the form of movable, immovable, intangible, or other rewards.
No Limit on Owners of the Business: An LLP requires a minimum of 2 partners, but there is no limit on the maximum number of partners. Comparatively speaking, a private limited company is restricted to having no more than 200 members.
Lower Registration Cost: Compared to creating a private limited or public limited company, the cost of registering an LLP is lower.
No Requirement of Compulsory Audit: In the case of LLPs, there is no mandatory requirement for accounts audit, whereas all companies, whether private or public, require account auditing.
Taxation Aspect on LLP: For income tax purposes, LLPs are treated on par with partnership firms. Thus, LLPs are liable for payment of income tax, and the share of its partners in the LLP is not liable to tax. The provision of 'deemed dividend' under income tax law is not applicable to LLPs.
