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Home / LLP Perspective from Manufacturing

LLP perspective from Manufacturing

LLP has an immense role to play in the Manufacturing Sector. Around 95% of industrial units in the country are SMEs (Small and Medium Enterprises) and the manufacturing sector is dominated by these SMEs. About 40% of value addition in the manufacturing sector takes place in the segment.

Over 90% of these SMEs are registered as proprietorships, about 2%to 3% as partnerships and less than 2% as companies as per a survey conducted by the ministry of small-scale industries. The reason of Non presence of Corporate Form in the manufacturing Sector is high Compliance cost. Vice – Versa the presence of Proprietorship is due to complete flexibility and less compliance cost. But for this gain the sector is losing the credit facility from the bankers.

Now the Limited Liability Partnership form has opened the door for Manufacturing Sector to enjoy the dual advantage of less compliance with higher access to credits in the market. Another advantage for SMEs that in the new LLP form alike Companies, only the Limited Liability Partnership having turnover/contribution of more than Rs. 40/25 Lacs have to get their accounts audited as per the requirement of law providing a step ahead in the flexibility.

SMEs would benefit most from LLP form, as it would allow an entrepreneur to get into the business without exposing his full assets to it. In an increasingly litigious market environment, the prospect of being a member of a partnership firm or Proprietorship with unlimited personal liability is considered risky and unattractive and on the other side the corporate form is expensive for SMEs. LLP provides a bridge between the two risks where an entrepreneur would be able to foray into a business venture without any fear of being held liable for the partners' misconduct.

Service Sector

LLP has come like boon for the service sector and especially for professionals like chartered accountants/company secretaries & advocates. Now, LLP will give the professions the much needed impetus of global presence and level playing field against their foreign counterparts.

From the perspective of customers, Limited Liability Professional Partnership concerns will provide a single-window shop to all people wanting to avail professional services.

From the perspective of professionals, the regime of limited liability partnership will provide a platform to conduct profession efficiently that would in turn increase the capability to compete with global firms apart from making the presence felt in international market for professional services.

The introduction of LLP form of business would also promote entrepreneurship, particularly in relation to the knowledge-based industries such as the information technology and biotechnology sectors.

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