Below are the benefits of converting Proprietorship into LLP:
Separate Legal Existence: Limited liability partnership is a separate legal entity, and its existence is separate from its partners, unlike the general partnership firm. This makes it possible to own assets and enter into contracts in the name of the LLP or sue a third party in case of any dispute.
Limited Liability of Owners: The liability of Partners is limited to the extent of capital contribution agreed by the partners in the LLP Agreement. The loss or debt of LLP cannot be assigned to partners even while the dissolution of LLP. Further, one partner is not held responsible for the actions of negligence or misconduct of any other partner.
Flexibility to Operate: The LLP is managed and run according to the LLP agreement. It’s the partners that decide how the LLP would function and divide the duties and responsibilities. Hence, it is a very flexible structure and the partners are free to create their own rules of management which is not possible in other business structures.
Lower Compliance Requirement: Compared to a Private Company, there is a lower compliance requirement in case of LLP, including the audit requirement. The requirement of statutory audit arises on reaching a certain level of turnover or contribution. Further, provisions such as the meeting of partners, operation through resolutions are relaxed and not mandatory in every case.
Capital Requirement: No minimum capital is required to form a LLP. no minimum capital contribution requirement. It can be registered even with Rs. 1000 as total capital contribution.