Concept about Small LLP as Per LLP Act 2008
An LLP is the most preferred form of business entity in India since its introduction in the year 2008 through the Limited Liability Partnership Act, 2008. It is a combination of both partnership and a company form of entity. Similar to a partnership firm it is also guided by agreement i,e., LLP agreement which defines the very basic structure of the business. Unlike partnership firms, the liability of the partners in LLP is limited to their capital contribution. It is a separate legal entity with perpetual succession like a company. This type of business form is mostly preferred by professionals, family-owned businesses, etc. who can carry out their business with limited controls.
The Limited Liability Partnership (Amendment) Act, 2021 had amended the Limited Liability Partnership Act, 2008, and has introduced the concept of “small LLP” and “start-up LLP”.
The new type of small LLP is similar to the concept of a small company which was introduced first in the Companies Act, 2013. The main objective behind the introduction of this new class of LLP is to aid small LLP businesses in the ease of doing business in India. The Government has taken various steps in recent years to ease out the difficulties faced by the businesses in India.
According to this amendment act, a small Limited Liability Partnership(small LLP) means any LLP
- Whose contribution is less than Rs. 25,00,000 or other higher amount (not exceeding Rs. 5,00,00,000) that may be prescribed; and
- Whose turnover for the preceding financial year does not exceed Rs. 40,00,000 or other higher amount (not exceeding Rs. 50,00,00,000) that may be prescribed; or
- Which meets such other requirements as prescribed from time to time.
Further, startup LLPs have not been defined by the government in this amendment act.
The basic advantage of this classification will be that these classes of LLPs may get exemption from various disclosures, audits, reduced ROC filing requirements, and other benefits that will be announced by the government.