Limited Liability Partnership (LLP)

A Limited Liability Partnership (LLP) is a hybrid business structure that combines the flexibility of a partnership with the benefit of limited liability for its partners.

It is governed by the Limited Liability Partnership Act, 2008 and is treated as a separate legal entity from its partners.

1. Key Features of LLP

• Separate legal identity from partners
• Limited liability of partners
• Perpetual succession (continues despite change in partners)
• No minimum capital requirement
• Flexible internal structure through LLP Agreement

2. Partners in LLP

• Requires a minimum of 2 partners
• At least 2 designated partners (responsible for compliance)
• Partners can be individuals or corporate entities

3. Taxation of LLP

• LLP is taxed as a separate entity
• Flat tax rate of 30% (plus surcharge and cess, if applicable)
• Share of profit received by partners is exempt in their hands

4. Advantages of LLP

• Limited liability protection
• Lower compliance compared to companies
• No dividend distribution tax
• Flexibility in profit-sharing

5. Compliance Requirements

• Filing of annual return and statement of accounts
• Maintenance of books of accounts
• Audit required if turnover exceeds prescribed limits
• Income tax return filing

6. LLP Agreement

• Defines rights and duties of partners
• Specifies profit-sharing ratio
• Governs management and operations

This is the backbone of LLP structure.

7. Difference Between LLP and Partnership Firm

• LLP has limited liability, partnership does not
• LLP is a separate legal entity, partnership is not
• LLP has higher compliance but better legal protection

8. Common Mistakes

• Not drafting a proper LLP agreement
• Ignoring compliance requirements
• Mixing personal and LLP transactions
• Misunderstanding tax implications

Practical Insight

Most people choose LLP thinking it’s just a “better partnership.”

That’s half the picture.

LLP works best when:

• liability protection matters
• multiple partners are involved
• long-term structure is needed

Otherwise, simpler structures may work better.

How N D Savla & Associates Can Help

At N D Savla & Associates, we help you:

• Decide whether LLP is the right structure
• Handle LLP incorporation and documentation
• Draft customised LLP agreements
• Ensure tax and compliance management