What is the purpose of an LLP formation?

Answer 1

Now that we know how an LLP works or functions, we will be discussing why business choose their LLP mode of registration:-

Avoiding Complexity of a Corporation

LLP generally doesn not have the complexity as that of a private Ltd company, and also has easy and less compliance and protects the partners from liability.

Management Flexibility

There is flexibility in business management of LLP , in decision making as there is not separate management involved to manage the daily affairs, and there are no shareholders or directors like that in a private limited. The decision making is free from unlimited liability i.e protects the personal liability.

Profit Sharing Flexibility

Profit sharing in that of LLP, is easier and better and more structural as that of private limited company, it is direct sharing in profit between the partner as agreed.

No minimum capital requirement

There is no minimum requirement of capital to start an LLP, as compared to that of a corporation business. This is why LLP is preferred by many people.

No effect of change in partnerhsip

There is no effect in change in partnership on an LLP, unlike in corporations or partnership business which has effect of change in its partners.

Separate Legal Entity

It is a separate legal entity, from it partners it can buy, rent and own properties different from that of its partners. Owning and purchasing things in the name of the company for business purposes gives taxing benefits, which is a huge benefit incorporating company as an LLP, it also has perpetual succession which means it refers to the continuous and uninterrupted existence of an organization despite changes in its membership or ownership.