Advantages and Disadvantages of LLP

Though a Limited Liability Partnership possesses the flexibility of a Partnership and enjoys the benefits as of a Company, its major advantages and disadvantages are to be noted before opting your business as LLP. The major advantages of an LLP are as follows:-

Advantages

1.Limited Liability:

As per the Act, the partners have the flexibility of limited liability, any errors or negligence of one partner will not be the obligation of the other partner. The assets of partners are secured

2.Perpetual Succession:

Similar to those of a company, the LLP have the facility of nominating the successor. However, it is restricted that a partner cannot be a minor.

3.Low Cost:

Compared to the incorporation formalities of a private or public limited company, the incorporation of LLP involves low cost.

4.No restriction in number of Partners:

As per the Act, the only requirement for an LLP is a minimum number of two Partners to be involved. There is no restriction in the number of maximum partners. In the case of Partnership it is limited to 10 and for a Private Company it is limited to 200

5.No Compulsory Audit:

It is not mandatory for an LLP to get its accounts audited, as in other registered companies it is mandatory.

6.Tax Benefits:

As a business, an LLP is not required to file taxes; however individual partners have to file their taxes individually. LLP is taxed like a private company, still any profits that are distributed after tax is not countable; meaning there is no dividend distribution tax and no minimum alternate tax.

To know more Benefits of Registering an LLP.

Disadvantages

1.Not all states:

Many of the states do not consider LLP as a legal business and hence they do not allow it to operate in their State.

2.Less Credibility:

As of its nature, having limited liability and partners assets are treated separately, the credibility of LLP is still a question for creditors.