A limited liability company simplifies business formation and provides a flexible working environment. How many partners do you need to form an LLP?
LLPs require that partners contribute only what they have agreed to. Individual partners are also protected from joint responsibility resulting from improper acts or misconduct committed by another partner, since no partner can be held responsible for autonomous or unauthorized acts committed by another partner.
How Many Partners Must An LLP Have?
An LLP requires a minimum of two partners to form. The partner in the LLP who continues to work becomes personally responsible if the number of partners drops below two for six consecutive months. An LLP does not have a limit as to how many partners it may have.
As a rule, partnerships can be formed with as few as two partners and as many as fifty. From this perspective, we can see that while the lower ceiling is the same in partnerships and LLPs, the upper ceiling in a partnership is restricted while it is open-ended in an LLP.
Registration Of Limited Liability Partnerships: An Brief
Creating a limited liability partnership in India requires a Director Identification Number (DIN). Online forms are available to get this number. Digital signatures are required to register. Before you can use your name, you must obtain approval from the Ministry of Corporate Affairs before you can actually use it. If the name is approved, an LLP can be formed by filing an incorporation form.
Limited Liability Companies vs. Limited Liability Partnerships
Many companies maintain numerous records and registers, requiring a lot of filing and document maintenance. LLPs, on the other hand, are not required to keep such detailed statutory records.
Limited Liability Partnership : Disadvantages
- The biggest disadvantage of an LLP is that it is required to file an income tax return and an MCA annual return every year, even if it doesn’t do anything. The penalties are severe if it doesn’t.
- In order to transfer ownership rights, the other partners must agree.
- There must be at least two partners in a limited liability partnership. In the event that one of the partners leaves the LLP, it must be dissolved if the other partner cannot be replaced.
Capital Contributions Determine The Incorporation Fee Of An LLP, Fee Slabs Are Outlined In The MCA:
- Partnerships with contributions of up to * 1 lakh must pay * 500/-.
- ₹ 2000/- for a limited liability partnership with a contribution exceeding 1 lakh but not exceeding 5 lakhs
- LLCs who contribute more than * 5 lakhs but not more than * 10 lakhs must pay * 4000/-
- If a limited liability partnership contributes more than *10 lakh, it will receive *5000.
In A Nutshell
An LLP must always have two partners. When it’s time to form your LLP, contact the professionals.