LLP or Company

Limited Liability Partnership (LLP) is a new form of corporate business entity that gives the benefits of limited liability of a company and the flexibility of a partnership. LLP, like a company, shall be a body corporate, a legal entity separate from its partners and having perpetual succession. Like partnership, LLP is based on an agreement between the partners and its business can directly managed by the partners. Even though it is a new concept in India, the LLP structure is available in countries like United Kingdom, United States of America, various Gulf countries, Australia and Singapore. Our LLP Act is broadly based on UK LLP Act and Singapore LLP Act. Both these Acts allow creation of LLPs in a body corporate form i.e. as a separate legal entity, separate from its partners/members.
Characteristics of LLP:
·	The LLP can continue its existence irrespective of changes in partners.
·	It is capable of entering into contracts and holding property in its own name
·	The LLP is a separate legal entity, is liable to the full extent of its assets but liability of the partners is limited to their agreed contribution in the LLP.
·	No partner is liable on account of the independent or un-authorized actions of other partners.
·	Mutual rights and duties of the partners within a LLP are governed by an agreement between the partners or between the partners and the LLP as the case may be. The LLP, however, is not relieved of the liability for its other obligations as a separate entity.
Incorporating LLP is advantageous:
1.	No Minimum Alternate Tax & Dividend Distribution Tax
	As per the Budget 2009-10, LLP will be treated as Partnership firms for the purpose of Income Tax and will be taxed like a partnership firm.
2.	Statutory Auditing not compulsory up to certain limits.
	But LLP has to maintain its books of account and has to file its accounts every year with the Registrar of Companies. So normally  audit will come into the scene.
3.	Partners can directly manage the business of the LLP.
	In a company, members have no access in the business of the company.
4.	No restriction to maximum number of partners.
5.	There is no strict provisions for holding meetings of partners/ no of meetings to be held in each year.
6.	No restriction on minimum or maximum contribution to capital.
7.	There is no strict provision for maintaining Common seal for LLP.
7.	There is no certificate for evidencing capital contribution to LLP such as share certificate as in case of a company. LLP agreement provides for it.
8.	For the time being, accounting standards are not applicable.
9.	No provision for maintaining minutes of the meetings.
But whether a L L P or a company is decided by many other things:
1.	Even though LLP Act came into effect in 2008, many other Acts are not amended yet to recognize LLP. It is possible to register land in the name of a company. But in the name of LLP, is it possible?
2.	There may issues between partners and that will affect the business of LLP. As far as a company is concerned, the issues between Directors or members will normally not affect the business of the company, since management is separate from ownership.
3.	Due to Stringent Compliances and disclosures under various laws, financial institutions and other banking institutions recognize companies than any other forms of business.
4.	Managing a company requires more professionalism than LLP. Professionally managed companies are showing success stories.
5.	The LLP Act 2008 empowers the Central Government to apply provisions of the Companies Act, 1956 to LLPs at any time.
6.	LLPs are concerned; there is no provision for creation of charges. Hence financial institutions will not interested in LLPs.
7.	Legal compliances are very less for LLP than companies.
8.	Like companies, the Central Government has powers to investigate into the affairs of an LLP.
Owing to flexibility in its structure and operation, the LLP is suitable for small enterprises and for investment by venture capital. But due to Stringent Compliances and disclosures under various laws, Companies enjoys high degree of creditworthiness.  A company has more goodwill and good image in corporate market than a Partnership firm/ Limited Liability Partnership.