Whatever the field is! Whatever the product is! Whatever the industry is! Myths are something common. There are lots of differences between what is really true and what is believed to be true. So, when it comes to Limited liability partnership in India, there are lots of myths believed and that have to be encountered. The article gives a deep insight of that it is. Get to know more reading here!
Myth 1: Profit sharing and the capital ratio is the same
The profit sharing ratio and capital contribution ratio must generally be the same while executing an LLP agreement. Partners have the freedom to decide both.
Partner’s profit sharing ratio is what they take home. An investor’s capital is what he or she contributes to the business. The ownership is also determined by capital. The two factors are independent of one another.
Myth 2: There is no distinction between partners
When you carefully understand what an LLP is, you will find that there are two types of partners – the Partner and the Designated Partner. The partnership does not provide this distinction, but LLP does. A limited liability partnership (LLP) must assign responsibilities and obligations to a specific individual. Therefore, designated partners have been appointed. Along with prescribed responsibilities, these partners ensure that the LLP adheres to its annual and other compliance obligations. Learn what makes Designated Partners different from other LLP partners.
Myth 3: All data is accessible to the public
This confusion occurs because of the nature of a company. LLPs, however, do not reserve partner data. General partners have access to designate partner names, DINs, and other details on the MCA portal.
Additionally, LLP agreements are private documents. The internal agreement between partners is also outlined, which raises concerns.
It is public to view documents such as annual returns, financial statements, and other forms. Business credibility is built upon these documents by banks, financial institutions, and other parties. Public documents should not be viewed as a flaw by you, but rather as a virtue.
Myth 4: LLP registration is an expensive affair
As a final note. There is no evidence that LLPs are more expensive to set up than general partnerships. The registration cost is heavily influenced by the professional’s services, as the Government’s fee remains relatively constant. We take government registration fees into account when choosing a professional. At present, the fee for LLP registration online is around 750-1000 INR. For the agreement to be executed, stamp duty must also be paid. The amount of stamp duty payable depends on the capital contribution and the state in which the property is situated. These factors determine the amount payable, which is usually INR 500. With LegalWiz.in, you can easily form a company. Furthermore, we offer tailored offerings to help you choose the right package at a reasonable price.
It is important to understand the structure of a business from the beginning. Among other matters, the business structure affects the manner in which operations are carried out, taxation, and many others. Make sure you choose the right business structure and that any misconceptions you have are cleared up. Throughout this article, I’ve addressed misconceptions we’ve encountered frequently.