A limited liability partnership is a hybrid of a corporation and partnership. It possesses the characteristics of both of these types. As the term implies, partners have limited liability in the firm, which means that their assets do not get used for paying off the company’s debts.

Advantages

1. The formation is easy – Forming an LLP is easier. It is not complicated and time-consuming.
2. Liability – The LLP’s partners have limited liability, which means they are not liable to pay the company’s debts out of their assets. No partner is responsible for the misbehavior or misconduct of the other.
3. Indefinite succession – The Limited Liability Partnership’s life is unaffected by the death, retirement, or insolvency of one of its partners. Only the provisions of the Act of 2008 can get used to wind up the LLP.
4. Management of the company – The company’s directors oversee and carry out all of the company’s decisions and management actions. In comparison to the board of directors, shareholders have extremely little power.
5. Ownership is easily transferable – When it comes to joining and leaving the LLP, there are no restrictions. It is simple to join the firm as a partner and then quit or effortlessly transfer ownership to others.
6. Taxation is simple – Various taxes, such as the dividend distribution tax and the minimal alternative tax, do not apply to limited liability partnerships. When opposed to a corporation, the tax rate on a Limited Liability Partnership is lower.
7. There is no requirement for a mandatory audit – Every business must appoint an auditor to oversee the company’s internal management and accounting. In the case of LLPs, however, there is no requirement for a mandated audit. Only circumstances when the company’s turnover exceeds Rs 40 lakhs and the donation surpasses Rs 25 lakhs is an audit required.

Disadvantages

1. Not allowed in all states – Many states prohibit the formation of LLPs in their jurisdictions due to various tax perks and provisions. It is a disadvantage because many states do not allow entrepreneurs to start this type of business.
2. Credibility decreases – One of the most significant disadvantages of a Limited Liability Partnership is that many people do not regard it as a legitimate firm. People still place a higher value on companies and partnerships.
3. Partners do not consult – When it comes to decisions and agreements, the Limited Liability Partnership’s partners do not consult each other.
4. Transfer of interest – Although interest and ownership can get transferred, the process is usually lengthy. For complying with the terms of the act, several formalities are required.
5. Lack of acknowledgment – Because LLP got introduced in India in 2009, it is not widely accepted. It causes a stumbling block to the smooth operation of the company due to its lack of recognition. People are not likely to form LLP.