In the realm world of Business Professionals, the choice of business structure which the business would be functioning with. Amidst multiple structure acting as a viable structure, LLP registration for professionals stands out to be the perfect fit, depending upon the business needs. In this blog we would be discussing in detail, benefits of registering as an LLP from business professional perspective and consideration that they would need to keep in mind as well.

Benefits for Business Professionals

Following are the benefits for business professionals if they choose LLP Business structure for their business.

1. Limited Liability Protection

The structure of protecting the personal assets of the partners, where they are liable to the extent of the contribution that has been made, if what attracts a lot of business professionals, who start out a business, because rarely businesses are profitable since day one. This is one of the essential feature of registering as an LLP. This feature does not exist in a partnership business.

 A private limited also has limited liability protections, so the question that arises is why not private limited mode of registration, the following points make it clear.

2. Flexibility in Management

In an LLP, there is fleaxibility in management, the partners who are running and involved in day to day operation of the business also manage the business, but what happens in a private limited is it is owned by shares and the shareholders own the business, and they appoint separate management like Board of Directors & CEOs.

3. No minimum requirement of capital

There is no minimum capital required to start for business professional, to register themselves as an LLP, to start as a private limited they need to have capital. Bur registering as an LLP makes investors hesitant to invest in them, if business professional seek investment from investor, immediately after incorporation then it is not recommended to select this business structure, this is the best structure if the long-term vision of the business professional to run a bootsrapped business, then this business structure is very viable.

4. Pass-through Taxation Structure

An LLP has the same taxing structure as that of a business which has partnership structure of business, partners are taxed individually on the basis of the profit they make and file IT Returns on the basis of the profits that they have made, in partnership and LLP there are partners who take their cut, from the contribution they have made in the business whereas, the managing board in a private limited company draw salary and is subject to different taxing provision.

5. Separate Legal Entity

An LLP is a business structure which is different from that of its partners, an LLP can own, rent and buy property, it can be held liable different from that of its partners. This business structure is not a partnership, the partners  are made personally liable whereas, in an LLP they have limited liabilty, no partner is personally liable, their asset is kept safe. This business structure is also in that of private limited.

6. Perpetual Succession

An LLP is run by partners, as well as in that of a partnership business structure, hence they take cuts in their business , the cuts are as per their contribution made in the business. Whereas ,in that of a private limited they are appointed as employees and are given salaries, and there maybe system of cut in private limited but there might be certain terms and condition that they would be taking cut, incentive but generalsing it there are these systems which are intact . An LLP , is not effected by the change in the partners, same in that of business structure of a partnership, not bothered by change in partners or the structure.

7. Ease of compliance

It is easy to comply with that of the laws, post registration as compared to other forms of business, in that of an LLP. And the registration process is also simple and easy to comply as compared to other forms of business.

It has no taxing unless there is no profit just mere auditing as well as the IT Returns.

Consideration of LLP registration for Professionals

Following the benefits, these are the considerations that business professional need to keep in their minds:

1. No. of Partners

An LLP for its registration needs atleast two partners with them, who are designated partners , there might more no. of normal partners but there should be atleast two designated partners. These designated partner have more compliances towards the LLP. An LLP can operate with one partner for a period of six months , and for those six months the one operating partner would have “sole” liability, but it would not last for more than 6 months.

It can be good or bad decision to have multiple partners depending upon the needs of the business, it can be good as to have diversity , but it can be bad as it would have too many people in the management and make decision-making difficult.

2. LLP Agreement

This is a very important document used during the time of LLP registration for professionals. It is filed digitally, it contains right , duties, profit-sharing structures amongst the partner, any changes to it can be made with consultation of legal professional and the changes need to be drafted in a proper manner, which would protect any partner from liability, in case there is litigation. Once changed, the changed draft needs to be filed again

3. Professional Indemnity Experience

In running business in a fast-paced world it is bound to have leaps and bounds, and the partners and important stakeholders in an LLP, they need to protect themselves from the loss personally due to decision of other partners or other stakeholders , they can create indemnity in the terms of the LLP Agreement, to keep things in-check or protect themselves. Such kind of insurances are known as professional insurances.

4. Regulatory Approvals

Post LLP registration for professionals needs to get time to time approval of the changes made as well the regulatory compliance , from the authorized bodies or the RoC( Registrar of Companies). Like the income tax being filed and keeping audits of the financial statements. The LLP ,needs to keep their financial statements as well as books of accounts. The RoC needs to keep in loop of the financial health of the company every year.

5. Transition might be considered

After, choosing business structure be it any it can be transformed from one structure to another. After choosing a particular structure for a while, a change maybe considered. Business need to know that this is an option available to them post LLP registration for Professionals.

Conclusion

In conclusion, in the dynamic world of professional services and LLPs, the journey of choosing LLP structure for business comes with multiple benefits as well consideration which business professionals need to keep in mind. Hence, the right choice keeping in mind the appropriate decisions to be made by the business professionals, for long term sustainability and keep the business afloat. LLP is the best business structure a business professiona can choose, who wants to keep their company bootstrapped for a long period of time. Hence, these which dictates the future of the business decisions need to be made , with careful consideration of the consequences.

FAQs

1. Primary advantage of choosing LLP business structure as a professional?

The primary advantage is limited liability, safeguarding personal assets against business related liabilities.

2. Can professionals from any industry form an LLP?

While many professional can form an LLP, there maybe certain regulatory restrictions, hence it is necessary to keep the industry-specific regulation.

3. How does pass-through taxation benefit professional in LLP?

Partners are taxed at personal level, which gives them benefit and act as an efficient method for professionals.

4. What consideration should be kept in mind while drafting an LLP Agreement?

Professionals in the agreement should define clearly define roles, responsibilities, profit-sharing structure as well as the dispute resolution mechanism in the Agreement.

5. Professional indemnity necessary for partners in an LLP?

While not compulsory, it is always advisable for the partners to have professional insurance to safeguard their intrest agaisnt the mistake in professional descision in an LLP.

6. How is perpetual succession beneficial to an LLP?

In perpetual succession, ensures that there is no impact on the business with the change in parnterhsip structure or change in the partners on the LLP.

7. What role does regulatory compliance play in context of LLP or professional?

Regulatory compliance is crucial for the business and business professionals should be aware of industry-specific regulations and business professional should make sure that the LLP has adhered to legal compliance.