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Business Formation, LLP

Entrepreneurs, in general like flexibility or rather I should say a mix of that and a mix of this, and while choosing an entity type to register their business expectations is no different. Today we will be looking into one such thing, choosing LLP as an entity for registering one’s business.  The gist of this blog will be around the 3 aspects of LLP an entrepreneur should consider keeping in mind before registering one.


LLP is, again, a mix and match of two entity types – Company and Partnership. To talk about the major distinguishing features or to put it classy manner ‘The USPs of LLP’ – all partners have a form of limited liability for each individual’s protection within the partnership; partners have the right to manage the business directly; limits the personal liability of a partner for the errors, omissions, incompetence, or negligence of the LLP’s employees or other agents.


Aspect #1 – Characteristics of LLP

  • LLP has perpetual succession separate from its partners
  • Duties and rights of partners strictly governed by the LLP Deed Agreement.
  • In absence of LLP Deed Agreement, the duties and rights will be governed by the LLP Act.
  • Liability of the partners limited to their agreed contribution in the LLP
  • No partner would be liable for actions of other partners.
  • If LLP and the partners are found to have acted with an intent to defraud creditors, both wil be facing unlimited for all debts or other liabilities.
  • No limits to the number of partners of an LLP



Aspect #2 – Advantages of LLP

  • Separate legal entity
  • Easy to establish
  • Minimal legal and procedural requirements
  • Perpetual existence of LLP
  • No minimum capital limit
  • No maximum number of partners limit
  • LLP and partners are separate from each other
  • Easy to wind up
  • No requirement to maintain statutory records except Books of Accounts



Aspect #3 –Disadvantages of LLP

  • LLP cannot raise funds from public
  • No separation of management from owners
  • RoC returns filing penalty is higher



Difference between LLP and other entities



We at Wazzeer have helped businesses in various sectors start smoothly without hassle. We would be very excited to help you kick your business and thereafter too. So let’s connect -> “Get Started!”
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Business Formation, LLP

What you know is right, to incorporate an LLP you need two or more persons with a view to becoming only subscribers of profit that the business would make. But, before you become  partner in LLP things you should consider knowing is covered in this blog. Remember, to register an LLP you would need a professional, and having a qualified professional on your side while incorporating is the best you could do, we at Wazzeer are experts in this matter.


Who can become a partner in an LLP?

Any individual or corporate body can become a partner of LLP, provided:

  1. Individual with sound mind as per the Court of competent jurisdiction
  2. Individual is not adjunct under any grounds


How many partners can an LLP consist of?


Minimum of 2 partners and maximum could be any number. If at any time the number of partners of an LLP is reduced below two, yet the LLP continues to carry out business for than 6 months, the partner who runs business during that period is liable for all LLP activities.

 

If you think this is so simple, the true game changer is coming up: Designated Partner Vs Partner

 

Every LLP should consist of at least two designated partners who are individuals and at least one of them should be Indian resident. Other partners are more like shareholders.

 

The Designated partners:

  • Are like directors of the firm
  • Are responsible for the LLP being fully compliant
  • Are liable to all penalties imposed on LLP
  • Are the authority who executes, manages, and decides for the LLP

 

To be a Designated Partner: This would be carried out in accordance with LLP Agreement

  • As a partner, you should give prior consent to LLP
  • File with the registrar the particulars of every individual within 30 days of appointment
  • Obtain Designated Partner Identification Number (DPIN) now called dIn from the central government.
  • If the Body corporate wishes to be a Body corporate it has to appoint a nominee to act as a Designated Partner on behalf of the Body corporate.

 

Note: In case Foreign Body Corporate or Foreigner is involved in an LLP, the funds transferred by this foreign source are allowed in only those sectors where 100% FDI is allowed.

Remember, the LLP Agreement is the rulebook and the game has to be played in accordance with this holy rule book.

Wazzeer has helped over hundreds of LLPs starting from incorporation till fundraising compliance, we would be very happy to serve you. Let’s connect to build a success story.

 

 

 

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Business Registration, LLP, Partnership Firm, Start up Lessons, Trademark
Every business entity needs to be given some name and the functioning of the business is carried out in that name only. In the case of a company which enjoys the status of the separate legal entity, choosing business name in India is a must. Name approval from the Registrar of Companies is pre-requisite condition before incorporation of the company.

Procedure for Business Name approval in India

Application to concerned Registrar of Companies to ascertain the availability of name in eForm-INC1 need to be made. Maximum 6 suitable business or company names can be submitted in order of preference and name must indicate main objects of the company.

While choosing business name in India, make note of following:

  • The proposed business names must not be similar or resemble the name of any other already registered company, or
  • Proposed business name should not violate the provisions of emblems and names (Prevention of Improper Use Act, 1950), or
  • Proposed business or company name(s) should not constitute an offense under any law.
  • Last word Limited need to be used in the case of a public limited Company, or Private Limited, in the case of a private limited Company and LLP needs to be used for Limited liability Partnerships.
Along with government fee and complete form, the digital signature of the applicant proposing the company needs to be attached. For filling this form Digital Signature of one of the Promoters is mandatory.

The details need to be provided in eForm INC1 are:-
  • Authorized capital for the proposed company
  • Main objectives of the proposed company
  • State (location) of the proposed company
  • Personal details of all Promoter?s
  • Copy of trademark application/certificate (if applicable)
  • In case, there is a logo associated with trademark then image of logo
  • Balance sheet (if applicable) and Income tax returns for last 2 years

If the name is approved by Registrar of Companies, letter of acceptance is issued for the proposed name. If proposed name(s) are not available, fresh names can be applied through the same application.


We will be glad to help you in choosing a business name, let’s connect.

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Business Formation, LLP, Uncategorized

Advantages and Disadvantages of LLP is one of the most asked questions by entrepreneurs in India.  We at Wazzeer decided to help you understand you understand briefly.

Advantages of a Limited Liability Partnership

  1. As Many Owners As Needed One of the greatest things of a limited liability partnership is that there is no limit on a number of owners that can be involved with the business. This is great because it evenly spreads out the amount of liability that each partner can have if something were to go wrong with the business.

  2. Much Less Liability Just as the name suggests, limited liability partnerships limit your liability. Since there are multiple owners involved in the business all of the risks of the business are spread out and made much smaller than if a single person was responsible for the business on their own. This generally refers to legal issues, like if the company was sued for any reason.

  3. Tax Benefits Another one of the great benefits of operating underneath an LLP is how you file taxes. The partnership itself doesn?t have to file taxes as a business, which provides great breaks for the company. However, each individual partner must file a variety of different tax forms regarding the business.

  4. Great Flexibility Flexibility is a defining characteristic of limited liability partnerships. Each partner in the business has the ability to decide how much they want to contribute and how much of a partner they truly want to be in the business. They are also not obligated to participate in business meetings or consultations with anyone that they do not feel the need to.

Liability Protection

In general partnerships, each participant is personally responsible for the actions of the company. This includes debts, liabilities and the wrongful acts of other partners. One advantage of a limited liability partnership is the liability protection it affords. This type of partnership structure protects individual partners ?from personal liability for negligent acts of other partners or employees not under their direct control,? states the SBA. In addition, individual partners are not personally responsible for company debts or other obligations. This is advantageous for an individual partner when potential lawsuits or claims of negligence against the business are concerned.

Tax Advantages

Individuals in a partnership are normally liable for filing personal income taxes, self-employment taxes and estimated taxes for themselves, according to the Internal Revenue Service. The partnership itself is not responsible for paying taxes. The credits and deductions of the company are passed through to partners to file

on

their individual tax returns. Credits and deductions are divided by the percentage of individual interest each partner has in the company. This can be beneficial for partners who have a limited interest in the company or special tax requirements due to their interests in other businesses.

Flexibility

Limited liability partnerships offer participants flexibility in business ownership. Partners have the authority to decide how they will individually contribute to business operations. Managerial duties can be divided equally or separated based on the experience of each partner. In addition, partners who have a financial interest in the company can elect to not have any authority over business decisions but still maintain ownership rights based on their percentage interest in the company. Flexibility in business operations can become a disadvantage when partners make decisions based on personal interests and not the interest of the partnership as a whole.  

Disadvantages of a Limited Liability Partnership

  1. Not All States Are On Board Due to the tax benefits and tricky workings of an LLP, some states do not allow them to form or operate in their region. Another big problem is that many states do not recognize LLP?s as a legal business.

  2. Additional Taxes Just like some states do not recognize, the majority of the rest pose large tax limits on limited liability partnerships. These taxes can come in as additional taxes when registering as well as issues with personal tax filing.

  3. Less Business Credibility Another huge problem with limited liability partnerships is the fact that other businesses and many consumers or clients do not see them as a credible business. Corporations gain much more respect and are generally more successful than LLPs.

Because of the special structure of limited liability partnerships, taxing authorities in some states recognize the structure as non-partnership

for tax purposes. This could possibly be a disadvantage for partners who require special tax consideration. In addition, unlike general partnerships, limited liability partnerships are not recognized as legal business structures in every state. Some states limit the creation of a limited liability partnership to professionals such as doctors or lawyers. Another disadvantage is that individual partners are not obligated to consult with other participants in certain business agreements. For the protection of the overall integrity of the company, you should create a partnership agreement that specifically outlines what each limited partner can and cannot do when making business decisions.

Important Facts About Limited Liability Partnerships

  • The person who is responsible for handling taxes can be held personally responsible for any unpaid taxes from the business.

  • Each partner has a duty of care position in the business. If something were to happen in their area, they are held personally and legally responsible.
  • In order to set up an LLP, each partner must set up a limited liability partnership agreement and register it in their state.

  • In Canada, only lawyers and accountants are permitted to operate underneath a limited liability partnership.

  • The first LLP in Japan was permitted in 2006.

  • The United States is the only country to allow each state to determine their own laws on the forming of LLPs


Wazzeer is vouched by Entrepreneurs as the most reliable Legal and Accounting Partner. We would be super excited to see your startup kick starts seamlessly. Let’s Connect! ?
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