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Tutorial-1 Limitations/Disadvantages of Limited Liability partnership (LLP)
Tutorial-1 Limitations/Disadvantages of Limited Liability partnership (LLP)
Understanding the limitations and perks of anything would help the individuals get the additional perspective of related matter. Specially the The entrepreneur needs to understand these things quite in details as it may create various stumbling blocks, which may delay breakthrough related to Startup growth. Here in this article we would explore some of the limitations or disadvantages that would help any related entrepreneur avoid possible future hassles.
- Limitation in the formation of LLP
As the basic structure or model of the LLP is similar to that of any partnership firm but it requires minimum two partners to form it. Thus, LLP cannot be formed by a single person. NRI/ Foreign national who want to form an LLP in India then at least one partner should be a resident of India. Two foreign partners cannot form LLP without having one resident Indian partner along with them.
It takes more days to form, as all the partners’ signatures are required for each and every document which is then to be attached to required e-forms. Therefore self attestation of each partner on documents is more as compared to the formation of any Private Ltd.
- Assets of LLP
Partners undertake to contribute some amount towards LLP firm which they contribute in the form of cash or assets, while executing the LLP agreement. Once cash or assets are contributed to LLP, it cannot be returned to the partners of an LLP unless there is any specific provision mentioned in LLP agreement
- Difficulty in transfer of ownership
Transfer of ownership is not a easy job in Limited Liability Partnership (LLP), As it requires consent of all partners of firm.
Let’s assume that if any partner wants to transfer his ownership he/she have to gain the consent of all partners. And resolution is required to be passed by majority of partners regarding the matter.
