{"id":16826,"date":"2020-11-27T14:30:37","date_gmt":"2020-11-27T09:00:37","guid":{"rendered":"https:\/\/swaritadvisors.com\/learning\/?p=16826"},"modified":"2020-11-27T14:30:39","modified_gmt":"2020-11-27T09:00:39","slug":"why-startups-choose-llp-to-start-business-in-india","status":"publish","type":"post","link":"https:\/\/swaritadvisors.com\/learning\/why-startups-choose-llp-to-start-business-in-india\/","title":{"rendered":"Why Startups Choose LLP to Start Business in India?"},"content":{"rendered":"\n<p class=\"has-drop-cap\">Startups are entrepreneurial undertakings, projects, or enterprises that are normally young in age and growing in nature. Also, embryonic entrepreneurs tend to be ambitious in approach as they want to create a marketplace where they offer and develop both inventive and innovative products and service. As a result, out of all the business formats available, startups choose LLP to start a business in India.<\/p>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_65 counter-hierarchy ez-toc-counter ez-toc-light-blue ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a3a8bfdd3faf\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a3a8bfdd3faf\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/swaritadvisors.com\/learning\/why-startups-choose-llp-to-start-business-in-india\/#Know_the_Concept_of_Limited_Liability_Partnership\" title=\"Know the Concept of Limited Liability Partnership\">Know the Concept of Limited Liability Partnership<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/swaritadvisors.com\/learning\/why-startups-choose-llp-to-start-business-in-india\/#Minimum_Requirements_for_Startups_to_Incorporate_an_LLP\" title=\"Minimum Requirements for Startups\nto Incorporate an LLP \">Minimum Requirements for Startups\nto Incorporate an LLP <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/swaritadvisors.com\/learning\/why-startups-choose-llp-to-start-business-in-india\/#Why_Startups_Choose_LLP\" title=\"Why Startups Choose LLP?\">Why Startups Choose LLP?<\/a><ul class='ez-toc-list-level-3' ><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/swaritadvisors.com\/learning\/why-startups-choose-llp-to-start-business-in-india\/#Easy_to_Incorporate_an_LLP\" title=\"Easy to Incorporate an LLP\">Easy to Incorporate an LLP<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/swaritadvisors.com\/learning\/why-startups-choose-llp-to-start-business-in-india\/#No_Need_of_Minimum_Capital\" title=\"No Need of Minimum Capital\">No Need of Minimum Capital<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/swaritadvisors.com\/learning\/why-startups-choose-llp-to-start-business-in-india\/#Easy_to_Operate\" title=\"Easy to Operate\">Easy to Operate<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/swaritadvisors.com\/learning\/why-startups-choose-llp-to-start-business-in-india\/#Lesser_Compliance\" title=\"Lesser Compliance\">Lesser Compliance<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/swaritadvisors.com\/learning\/why-startups-choose-llp-to-start-business-in-india\/#Separate_Legal_Entity\" title=\"Separate Legal Entity\">Separate Legal Entity<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-9\" href=\"https:\/\/swaritadvisors.com\/learning\/why-startups-choose-llp-to-start-business-in-india\/#Protection_from_Debts\" title=\"Protection from Debts\">Protection from Debts<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-10\" href=\"https:\/\/swaritadvisors.com\/learning\/why-startups-choose-llp-to-start-business-in-india\/#No_Joint_Liability\" title=\"No Joint Liability\">No Joint Liability<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-11\" href=\"https:\/\/swaritadvisors.com\/learning\/why-startups-choose-llp-to-start-business-in-india\/#Separate_CIBIL_Score\" title=\"Separate CIBIL Score\">Separate CIBIL Score<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-12\" href=\"https:\/\/swaritadvisors.com\/learning\/why-startups-choose-llp-to-start-business-in-india\/#Loan_to_Partners\" title=\"Loan to Partners\">Loan to Partners<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-13\" href=\"https:\/\/swaritadvisors.com\/learning\/why-startups-choose-llp-to-start-business-in-india\/#Easy_to_Wind_up\" title=\"Easy to Wind up\">Easy to Wind up<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-14\" href=\"https:\/\/swaritadvisors.com\/learning\/why-startups-choose-llp-to-start-business-in-india\/#FDI_Investments\" title=\"FDI Investments\">FDI Investments<\/a><\/li><\/ul><\/li><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-15\" href=\"https:\/\/swaritadvisors.com\/learning\/why-startups-choose-llp-to-start-business-in-india\/#Conclusion\" title=\"Conclusion\">Conclusion<\/a><\/li><\/ul><\/nav><\/div>\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Know_the_Concept_of_Limited_Liability_Partnership\"><\/span>Know the Concept of Limited Liability Partnership<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Limited Liability Partnership is a breath of fresh air in the realm of Company Law. It is viewed as an Alternate Corporate Vehicle that seeks to acquire the principal benefits of both Private Company and Partnership.<\/p>\n\n\n\n<p>Moreover, to obtain <strong><a href=\"https:\/\/swaritadvisors.com\/limited-liability-partnership-registration\" class=\"text-primary\">LLP Registration in India<\/a><\/strong>, a minimum of 2 people are required. However, there is no need to have any amount as a minimum capital requirement for the same.<\/p>\n\n\n\n<p>Further, the reasons behind the growth of LLP in India is that it provides limited liability to its designated partners and flexibility in its internal management. However, it shall be considerate to mention that the concept of LLP (Limited Liability Partnership) is a different and distinct form LLC (Limited Liability Company).<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Minimum_Requirements_for_Startups_to_Incorporate_an_LLP\"><\/span>Minimum Requirements for Startups\nto Incorporate an LLP <span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>When startups choose LLP to start a business in India, the minimum requirements that they need to fulfil are as follows:<\/p>\n\n\n\n<ol><li>A minimum of 2people are\nrequired as Designated Partners;<\/li><li>Out of the 2 partners,\none must be an Indian Citizen, who is residing in India; <\/li><li>The registered office of\nthe Firm must be situated in India;<\/li><\/ol>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Why_Startups_Choose_LLP\"><\/span>Why Startups Choose LLP?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The reasons as to why Startups Choose LLP to start Business in India are as follows:<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter is-resized\"><img decoding=\"async\" loading=\"lazy\" src=\"https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/11\/Why-Startups-Choose-LLP-To-Start-Business-in-India-heading.png\" alt=\"Startups select LLP to start Business\" class=\"wp-image-16829\" width=\"596\" height=\"361\" srcset=\"https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/11\/Why-Startups-Choose-LLP-To-Start-Business-in-India-heading.png 1000w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/11\/Why-Startups-Choose-LLP-To-Start-Business-in-India-heading-300x182.png 300w, https:\/\/swaritadvisors.com\/learning\/wp-content\/uploads\/2020\/11\/Why-Startups-Choose-LLP-To-Start-Business-in-India-heading-768x467.png 768w\" sizes=\"(max-width: 596px) 100vw, 596px\" \/><\/figure><\/div>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Easy_to_Incorporate_an_LLP\"><\/span>Easy to Incorporate an LLP<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Nowadays, budding\nentrepreneurs choose something that is both easy and smooth to register. LLP\nfulfils both the conditions and includes just the basic registration\nrequirements, such as follows:<\/p>\n\n\n\n<ol><li>A minimum of 2 partners;<\/li><li>No upper limit for the maximum number of partners;<\/li><li>Out of the 2 partners,\none must be the Citizen of India;<\/li><li>Its registered office\nmust be in India;<\/li><\/ol>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"No_Need_of_Minimum_Capital\"><\/span>No Need of Minimum Capital<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>An LLP does not include any minimum capital requirement. That means one can start an LLP with just Rs 5000, or with no money as well. Further, the reason behind the same is that people normally face a financial crunch in their initial business days. As a result, the fee for obtaining LLP Registration is also very less.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Easy_to_Operate\"><\/span>Easy to Operate<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Limited Liability\nPartnership is one of the easiest forms of business structures available in\nIndia. It does not prescribe many responsibilities and obligations on its\npartners other than the ones mentioned in the LLP Agreement. Moreover, LLP, as\na business format, is easy to operate and conduct management.<\/p>\n\n\n\n<p>However,\nin the case of a private limited company, directors require to pass board\nresolutions in meetings for taking any&nbsp;decision, but,&nbsp;there is no\nsuch requirement in an LLP. The reason for the same is that in a Limited\nLiability Partnership, decisions&nbsp;are taken by the&nbsp;majority&nbsp;or in\nconsonance with the LLP agreement.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Lesser_Compliance\"><\/span>Lesser Compliance<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Once an individual has registered an LLP in India, there not many compliances that he\/she requires to follow. Therefore, for budding entrepreneurs obtaining LLP Registration is better than obtaining Private Limited Company Registration. <\/p>\n\n\n\n<p>Further, there is no need\nfor the partners of an LLP to hold general meetings, board meetings, and annual\ngeneral meeting, as the operations and management of an LLP are based on the\nprovisions of LLP Agreement.<\/p>\n\n\n\n<p>In the same manner, partners\ncan mutually decide and organize the internal management of an LLP, which will\nthen be included in the LLP Agreement. Further, the partners of an LLP require\nto file only two forms on an annual basis, i.e., Form 8 and Form 11.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Separate_Legal_Entity\"><\/span>Separate Legal Entity<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>A Limited Liability\nPartnership enjoys the feature of being a Separate Legal Entity. That means it\nhas the power to sue. Also, it shall be considerate to mention that the\npartners will not be liable for any legal case, and the authorities or\ncreditors can sue only the firm.&nbsp;<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Protection_from_Debts\"><\/span>Protection from Debts<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Just like <strong><a class=\"text-primary\" href=\"https:\/\/swaritadvisors.com\/private-limited-company-registration\">Private Limited Companies<\/a><\/strong>, the partners of an LLP are well protected against the debts taken by the Firm. Also, they will not be held personally liable for the Firm\u2019s debts. That means an LLP provides the benefit of Limited Liability to its partners.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"No_Joint_Liability\"><\/span>No Joint Liability<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>One of the most significant\nreasons as to why Startups Choose LLP to start Business\nin India is that there is no concept of Joint Liability. As per this feature,\nif in case a partner of an LLP commits fraud or forgery, then the remaining\npartners will not be held liable for his\/ her act.<\/p>\n\n\n\n<p>Likewise, if any partner\nacts negligently or carelessly, or does some act which causes loss, then, in\nthat case, only that specific partner will bear the loss incurred. <\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Separate_CIBIL_Score\"><\/span>Separate CIBIL Score<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>Another significant reason as\nto why Startups Choose LLP to start Business in India is that there are\nseparate CIBIL Scores for Partners and Firm. The reason behind the same is that\nthe partners of an LLP are its agents. As a result, separate CIBIL scores are\nprovided for partners and firm.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Loan_to_Partners\"><\/span>Loan to Partners<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>As per the provisions\nof the company law, a private company is not allowed to provide loan&nbsp;to\nits directors. However, in the case of an LLP, partners can get a loan from the\nFirm, if the same is allowed in the provisions of the LLP Agreement.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Easy_to_Wind_up\"><\/span>Easy to Wind up<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>In case anything goes\nwrong and partners decide to wind up the firm, then the partners can do the\nsame without undergoing intricate formalities. Also, a limited liability\npartnership can be wound up either voluntarily or by the order passed by the tribunal.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"FDI_Investments\"><\/span>FDI Investments<span class=\"ez-toc-section-end\"><\/span><\/h3>\n\n\n\n<p>By way of RBI\/201314\/566 A.P. (DIR.\nSeries) Circular No. 123, dated 16.4.2014, the Indian Government has allowed LLPs\nto have foreign direct investments (FDI). <\/p>\n\n\n\n<p>That means as per the provisions of the\nLLP Act 2008, the flow of FDI is allowed in both the formation and registration\nof a limited liability partnership. However, the same is subject to certain\nterms and conditions as specified in the circular mentioned above. <\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><span class=\"ez-toc-section\" id=\"Conclusion\"><\/span>Conclusion<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>As acclaimed by <strong>J.J. Irani<sup><a href=\"https:\/\/en.wikipedia.org\/wiki\/Jamshed_Jiji_Irani\" class=\"text-primary\"><strong><em>[1]<\/em><\/strong><\/a><\/sup><\/strong> Committee that, in view of the possibility for growth and development of the service sector, the need of providing the flexibility to small scale enterprises to participate in agreements and joint ventures that allow them to access technology and know-how; to bring together all the business synergies; and to face the increasing global competition allowed through WTO (World Trade Organisation), etc., the formation and registration of limited liability partnerships (LLPs) in India should be encouraged.<\/p>\n\n\n\n<p>Also, an LLP or a Limited Liability will prove to be a windfall for\nboth the startups and small and medium enterprises (SMEs), once the loopholes\nwill be construed and rectified by the Government. Therefore, LLP is the need of the hour and has the capacity to take\nour corporate sector to all over new heights in the global platform.<\/p>\n\n\n\n<p>At Swarit Advisors, our expert will guide you with both the process of LLP Registration and Annual LLP Compliance.<\/p>\n\n\n\n<p><b>Also, Read:<\/b> <mark style=\"background: #fffd03 !important;\"><a href=\"https:\/\/swaritadvisors.com\/learning\/major-differences-between-sole-proprietorship-llp-in-india\/\">Major Differences Between Sole Proprietorship Vs LLP in India<\/a><\/mark><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Startups are entrepreneurial undertakings, projects, or enterprises that are normally young in age and growing in nature. Also, embryonic entrepreneurs tend to be ambitious in approach as they want to create a marketplace where they offer and develop both inventive and innovative products and service. As a result, out of all the business formats available, [&hellip;]<\/p>\n","protected":false},"author":17,"featured_media":16828,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[167],"tags":[962],"_links":{"self":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/16826"}],"collection":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/users\/17"}],"replies":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/comments?post=16826"}],"version-history":[{"count":8,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/16826\/revisions"}],"predecessor-version":[{"id":16836,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/posts\/16826\/revisions\/16836"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/media\/16828"}],"wp:attachment":[{"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/media?parent=16826"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/categories?post=16826"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/swaritadvisors.com\/learning\/wp-json\/wp\/v2\/tags?post=16826"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}