Unveiling the LLP as Startup Advantages and Disadvantage1

1. Unveiling the LLP as Startup Advantages and Disadvantages LLP as Startup advantages and disadvantages is an interesting topic to understand and this blog focus on this topic. A startup has an opportunity, it can either incorporate into a Private Limited Company or Limited Liability Partnership (LLP). There are also other two options for the incorporation (1) One Person Company (OPC) (2) Sole Proprietorship These two options are mostly excluded, the reason is that they are not that good in attracting the investment of the company and also in Sole Proprietorship, the proprietor enjoys the most personal unlimited liability which is not highly appreciable. LLP is one of the options for the startups to get incorporated under it, as it will provide various advantages to the startups like flexibility and limited liability in the partnership firm. One of the most important things to be kept in mind is that LLP can enter into a contract by itself and it can hold or purchase the property of its own which is highly beneficial. The LLP has a great advantage in that it can continue its existence irrespective of the changes in partners. The Limited Liability Partnership is a separate legal entity, where it is liable to the full extent of its assets but the liability of the partners of that particular firm is limited to their agreed contribution towards the Limited Liability Partnership. Minimum Requirement to be fulfilled for LLP as a Startup

2. •A minimum of two Partners is required in order to start the LLP formation procedure. •In the Two designated partners, in which one must be an Indian Citizen who is residing in India. •The registered office should be located in India. LLP as Startup Advantages and Disadvantages •Advantages of LLP as a Startup •The main advantage of an LLP is that it is quite easy to start and manage. •Easy process of Incorporation. •It has a lesser cost of registration as compared to any other Company. •LLP is a separate legal entity, other than the partners in LLP •The partners in LLP enjoy limited liability. •There is no requirement for compulsory Audit. •When it is compared to the Private Limited firm, the annual ROC compliance in LLP is quite less. •LLP is suitable for small enterprises. •LLP suitable for investment by the venture capital. • Disadvantages of LLP as a Startup

3. •The main disadvantage of an LLP is that even if an LLP’s activities are not up to the level, no matter what it should mandatorily have to file the Income Tax Return and MCA Annual Return for every year. And in case, it is not filed, it should bear a heavy penalty. •If a partner wants to transfer his/her ownership rights then it is very necessary to obtain consent from all the partners. •A Limited Liability Partnership should compulsorily have two members. If in case one member chooses to leave then the LLP will be dissolved. •The FDI in LLP is allowed only with the prior information and approval from the Reserve Bank of India (RBI).