What is an LLP? An Overview
LLP Registration in India - A limited liability partnership or commonly called LLP is a type of business registaration in which some or all partners (depending on the jurisdiction) have limited liabilities. LLP is an alternative corporate business form that gives the benefits of limited liability of a Partnership Firm and the flexibility of a partnership. That is why it is also called a hybrid between a Partnership Firm and a partnership. In an LLP, each partner is not responsible or liable for another partner's misconduct or negligence. This distinguishes an LLP from a traditional partnership. The concept of the Limited Liability Partnership (LLP) was introduced in India in 2008 and is governed by The Limited liability Partnership Act, 2008. And this is why Limited Liability Partnership (LLP) has become a preferred form of organization among entrepreneurs.
Features of an LLP
- It is a separate legal entity so there is a distinction between partners and business.
- The liability of each partner is limited to the contribution made by the partner.
- Less compliances than a Pvt. Ltd. company.
- No requirement for minimum capital contribution.
- Costs more or less Rs.5000/- to form.
Just like a Private Limited Company, an LLP is also a corporate structure. A minimum of 2 partners are needed to incorporte an LLP. There is no upper limit on the maximum number of partners of LLP. Among the designated partners which should be minimum two, one of them must be an Indian resident.
The LLP is governed by the LLP Act 2008 and the duties, profits and losses of the LLP are governed by the LLP agreement or deed. The LLP Deed must have proper documentation on partner contribution as well as commitments as well as penalties for the partners if rules are broken.
Benefits of an Limited Liability Partnership
Limited Liability
One of the main advantages of an LLP is that the liability of the partners is limited to their capital contributions. This means that the personal assets of the partners are generally not at risk if the business incurs debts or faces legal issues.
Separate Legal Entity
An LLP is a separate legal entity from the partners. This means that it can enter into contracts, own assets, and incur liabilities in its own name.
Less Compliances
LLPs have much less compliances than a Private Limited Company. The audit of an LLP is mandatory if the LLP has a total turnover of more than INR 40 Lacs in a financial year or if it has contributed capital of more than INR 25 Lacs.
Ability to raise capital
An LLP can raise capital by admitting new partners or from Investors, Venture Capitalists or Private Equity Firms by issuing debentures, which can be helpful for businesses that need additional funding. FDI is also permitted for LLP provided certain specified conditions are met.
Eligibility Criteria to register an LLP
To form an LLP, one should meet the following criteria:
- A minimum of two partners are required to form an LLP
- Out of them atleast one should an Indian Resident
- If a body corporate is a partner, a natural person must be nominated to represent it
- Atleast one partner must have a DSC
- LLP must have a unique name that should not be similar to any existing Company or Trademark and must not contain any offensive or reserved words
Documents required for LLP Registration
Document Required for Partners
- PAN for Indian Residents
- Passport for Non-Indian Resident
- Aadhaar Card or Voter's Card or Driving License
- Latest Bank Statement or Telephone bill or Postpaid Bill or Electricity Bill or Notarized Rent agreement
- Passport size photograph
Document Required for Registered Office
- NOC from Landlord/lady
- Notarized Rent Agreement
- Utility Bill
- Sale deed in case of Owned Property
LLP Registration Process
Step 1: Obtaining DSC
LLPs require atleast one of the designated partners to have a Class 3 Digital Signature Certificate (DSC) from a registed Certifying Authority. Get your DSC here and register your DSC in MCA Portal.
Step 2: Application for DPIN
DPIN Stands for Designated Partner Identification Number. As soon as Desginated Partners obtains DSC, they have to apply for DPIN in the MCA Portal.
Step 3: Application For Name Approval
Simultaneously apply for Name approval for the LLP using LLP-RUN form in MCA Portal. While reserving the name it is recommended to put names that are not similar or identical to other companies and trademarks. But if somehow you cannot choose other name, an NOC is required from the similiar named company to get approved.
Step 4: Incorporation of LLP
After name approval, fill the FiLLip form in the MCA portal with details of the Business, Partners and ROC. And then file it with necessary documents as prescribed by the MCA Portal. The registrar will register the LLP in a week if every thing is according to the LLP Act. Post approval, a LLP Certificate of Incorporation will be issued in digital format from the Central Registration Centre of MCA.
Step 5: Application for PAN and TAN
In the FiLLip form choose the necessary actions to get PAN and TAN for the LLP.
Step 6: Filing of LLP Agreement
LLP Agreement is the document that governs the LLP. As per the MCA rules, an newly incorporated LLP has to file the LLP agreement under Form-3 within 30 days from the date of incorporation. Draft a LLP Deed with the required stamp duty as per the State Law and get it notarized. Then file it in the MCA portal.
Step 7: Getting LLP Incorporation Certificate
Congratulations on the newly incorporated LLP. Now maintain the compliances and you are good to go.
