Limited Liability Partnership is a balanced organization structure, carrying benefits conventional partnership and still limiting personal liabilities of the partners. LLPs are regulated as a contractual agreement between the partners under the Limited Liability Partnership Act, 2008. It is a popular choice for services and professional firms like Chartered Accountants, recruiting firms, consulting businesses, etc.
LLPs are similar to Private Limited Companies with respect to compliance and operational requirements. As it is recognized to be a separate legal entity than the partners, it can contract or involve in any legal proceedings in its own name. That enables the partners of an LLP to separate business liabilities or debts being recovered from their personal assets. Compliance requirement for LLPs are greater than regular partnership firms. However, Compared to a private limited company structure, LLPs have lesser compliance requirements and it is an economical option to incorporate and maintain.
As a shortfall, transfer of ownership of an LLP is not as easy as a company. Neither an LLP can issue ESOP. For the reason, LLP is not an ideal choice for startups who want to hyper-grow, seek seed investor or venture capital funding, or issue share capital to its employees.
The process of LLP Registration in India is revamped by the Ministry of Corporate Affairs. A quicker process of LLP incorporation is made available on 2nd October 2018 as part of the ease of doing business initiative by the government.