LLP or Company in India:
With the passing of the LLP Act in India, the choice to form and incorporate a LLP instead of a company under The companies Act of 1956 has now widened in public domain. Any entrepreneur has the choice of forming a LLP instead of forming a company which provides better and transparent operations in the LLP. Since the incorporation and formation of a company under the Indian laws in bit complex and time consuming process the obvious choice is the formation of a LLP by the willing partners. We can enlist the benefits of the LLP as compared to a company as under:
1. Cost Effectiveness: – To form and operate a LLP is very much cost effective as compared to a company under The Companies Act.
2. Credit Worthiness of organization:– LLP enjoy Comparatively higher creditworthiness from Partnership due to Stringent regulatory framework and well defined liabilities of the partners.
3. Simplified accounting:The LLP has to maintain very simplified accounting systems as compared to the statutorily complex accounting systems for the Companies which make the operations of the LLP very cost effective as well as easy.
4. Mandatory Audit of accounts:- Companies are required to get their accounts audited annually as per the provisions of the Companies Act, 1956 whereas all LLP except for those having turnover less than Rs.40 Lacs or Rs.25 Lacs contribution in any financial year are required to get their accounts audited annually as per the provisions of LLP Act 2008.
5. Liability of Statutory Records: The companies are under obligation to maintain various kinds of statutory records whereas the LLP is not under any such obligation to maintain such records which makes the operations of the LLP very easy and cost effective
6. Contracting capacities of the Partners/Director: The companies Act imposes several restrictions on the Directors of the company to enter into various kinds of agreements whereas the LLP Act does not impose any such restriction. The partners of the LLP are at greater freedom to enter into various contracts without any restrictions.
7. Statutory Meetings: Mandatory in case of company whereas no such requirement in the case of LLP.
8. Transfer of Share / Partnership rights in case of death: – In the case of companies in case of death of member, shares are transmitted to the legal heirs. Whereas under the LLP, in case of death of a partner, the legal heirs have the right to get the refund of the capital contribution + share in accumulated profits, if any. Legal heirs will not become partners.
9. Liability of Partners/Members: In case of companies: – Generally limited to the amount required to be paid up on each share. In the case of LLP, limited to the extent of their contribution towards LLP, except in case of intentional fraud or wrongful act of omission or commission by the partner.
A detailed discussion and services related to formation and operation of NGO in India is found at the website www.legalhelplineindia.com and another website which provides such services is www.trustman.org