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Advantages And Drawbacks of Setting Up LLP In India

When you finish planning for your business, it is time to get into some kind of excitement as you put the ideas into work and form a company. However, you must have a legal entity as well for the protection of your assets, but you may not have an idea of how it is going to be. When it comes to LLC or Limited Liability Company, you have often heard how easy it is to set it up, but you may still wonder if it is actually the perfect option for your business. What are some of the pros and cons ofsetting up LLC in India? The points below can resolve your queries.

Knowing the Basics

Of the types of business entities, some of them offer good protection against the liabilities while the rest do not. Ideally, the LLC follows the middle ground, thereby protecting its owner from personal liabilities. On the other hand, it also offers you the flexibility of operating your business without the prying eyes of the corporate world.

While setting up a business in India, you will discover that the LLC’s are protected by the same legal options as the big corporation that is highly guarded against personal liabilities. The owners of the limited liability companies are taxed and categorized as sole proprietors, which implies that the income generated from the business passes via the personal income taxes of the members. However, the laws may be different in the states and complying with them can be burdensome for the owner. Moreover, not complying with the regulatory mechanisms can expose the business and your family to certain risks. Therefore, it is extremely important to consult with law firms in India while finalizing the decision to form your company. It is a better idea to learn as much as you can and get information before you start your efforts.

Understanding the benefits of LLC

During a business set up in India, you must focus on the positive aspects of starting an LLC at first. As the name indicates, the liabilities of the members for this business prospect are restricted to their own investments. Therefore, if your business is sued due to any reason, your personal assets such as the real estate and bank accounts stay protected. The most you can lose is the money you have put into the business. However, this is not comprehensive protection as the members of the LLC can still be held for their criminal acts.

Moreover, the income from the business can be treated as your personal income and not subject to government regulations. Apart from this, there is no limit to the number of owners in this business structure. Furthermore, the amount of money to be invested in the business does not need to be equal to the percentage of ownership. Finally, the limited liability corporations do not need to have a board of directors or need to hold annual meetings. During the India entry strategy, you have to keep these points in mind.

Cons of LLC

The owners of these businesses need to work hard to find new investors and capital sources due to legal bindings. To be able to file as a corporation, the owners need to pay more fees. Besides this, some categories of businesses such as insurance companies, banks, and medical service companies cannot function as LLC’s. The lawyers in India are the best people to guide you whether your business can actually function as a limited liability corporation. Often, the difference of rules across the states can create confusion, so the owners need to stay careful.

Summing it up

Once you go through the pros and cons of forming an LLC in India, you can go ahead and consult a lawyer to help you to form the company and prepare the draft of the operating agreement.

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