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Limited Liability Partnership Firm (LLP) is a unique entity form of business entity that is easy to incorporate with a minimum of two partners and involves less post-registration compliance and maintenance as compared to any other form of business. To overcome the risk of unlimited liability, LLP formation came into the picture. If a start-up is not keen to raise funds and wants less stress on the compliance part, then they can opt for LLP.
LLP is an alternative business vehicle that gives the benefits of limited liability company and flexibility of a partnership firm. Since LLP contains elements of both ‘a corporate structure’ as well as ‘partnership firm structure’; it is many a time termed as a mixture of a company and a partnership. LLP is a separate legal entity that can continue its existence irrespective of changes in its partners. LLP is an incorporated partnership formed and registered under the Limited Liability Partnership Act, 2008.
Since, its introduction in 2010, LLPs have been well received with over one lakhs registrations in India. LLP is very useful and suitable for the following:
- Separate Legal Entity
An LLP is a separate legal entity just like companies. It follows the principle of perpetual succession. The entry and exit of a new partner or existing one does not dissolve its existence. Furthermore, the assets of the business are not owned by any of the partners.
- Limited Liability
The liability of each partner is limited to the contribution made by the partner. It means that if the company incur any losses, then the personal assets of the company’s partners won’t be seized. Also, they would not be required need to pay for those losses.
- No requirement of Minimum Capital Contribution
To start an LLP, you don’t need to keep up with any minimum capital requirement. You can start your LLP with as low as one rupee. Hence, the cost of forming an LLP is very low.
- Less Compliance
There are very Few compliances and regulations in comparison to any other form of an entity like a private company or Public Company.
- Easy transfer of ownership
In an LLP, it’s quite easy to transfer ownership to others. Unlike the traditional partnership firm where the addition of new partners affects its existence, in an LLP things are completely opposite.
- No Requirement of Audit
In LLP, there is no requirement of conducting Audit. The need for audit arises only during the following two situations:
- When the annual turnover of the business crosses the limit of Rs. 40 lakhs, or
- When the capital contribution goes above Rs. 25 lakhs.
- No tax levied
No tax is levied on the distribution of profits among the partners of LLP.
Following are the basic checklist to form an LLP Firm:
- Minimum 2 designated Partners
Partners are those who own the LLP and manage it. On the other hand, designated partners are responsible for compliance under the Act. The minimum number of partners to incorporate an LLP is two. Hence, among the partners,
- There should be a minimum of two designated partners who shall be individuals, and
- At least one of the partners should be a resident in India.
- Maximum Limit of Partners
There is no upper limit on the maximum number of partners of LLP. Hence, there can be any number of partners.
- PAN for all the partners
It is important to note that all the partners must compulsorily have a PAN.
- DPIN for all the partners
Every designated partner must have a Designated Partners Identification Number(DPIN). In case an individual is becoming a partner in an LLP for the first time, he will get it once the LLP is incorporated.
- Digital Signature Certificate (DSC) for one Designated Partner
Every proposed partner must have a DSC to digitally sign the e-forms for the formation of an LLP. In case you do not have DSC, you can apply for it through Registration SEVA at a very minimal cost.
- Registered Office
LLP must have an address for its Registered Office. It can be either residential or commercial space. Further, it can be owned or a rented one.
Here is a list of documents which are required from partners and LLP for registration:
Documents of Partners:
- Copy of PAN Card: All the partners are required to make available their PAN at the time of registering LLP. PAN card acts as a prime ID proof.
- Copy of Driving License/Voter ID: Partner can submit any one document out of Voter’s ID or Driver’s license.
- Latest Bank Statement/Mobile or Telephone Bill (not older than two months): These documents act as the residence proof of partners and must contain the name of the partner.
- Passport size Photograph: Partners should also provide their passport size photograph, preferably on white background.
- Passport (in case of Foreign Nationals/ NRIs): For becoming a partner in Indian LLP, foreign nationals and NRIs have to provide their passport mandatorily. Passport has to be notarized or apostilled by the relevant authorities in the country of such foreign nationals and NRI, else the Indian Embassy situated in that country can also sign the documents. Foreign Nationals or NRIs have to submit a proof of address also which will be a driving license, bank statement, residence card or any government-issued identity proof containing the address.
Note: If the documents are in a language, other than the English language, a notarized or apostilled translation copy will also need to be attached.
- Consent of Designated Partners in Form 9: Form 9 is signed by the designated partners giving their consent for becoming partners in the proposed LLP
Documents of LLP:
- Proof of Registered Office Address such as Electricity Bill etc.
- NOC and Rent Agreement in case the premise is a rented one
Apart from the above documents, a subscriber sheet needs to be signed by the designated partners which must be certified by a practicing professional agent.
Step 1: Obtain Digital Signature Certificate (DSC)
Before starting the process of registration, you must apply for the digital signature of the designated partners of the proposed LLP. This is because all the documents like LLP Registration Forms, ROC compliance forms and Tax Returns for LLP are filed online and are required to be digitally signed.
Hence, the designated partner must obtain their digital signature certificates before filing e-forms for registration and any other online purpose. You can contact us for getting a DSC at a very minimal cost.
Step 2: Apply for Reservation of Name
LLP-RUN(Limited Liability Partnership-Reserve Unique Name) is filed for the reservation of the name of proposed LLP by providing a unique name. The name must not be similar to already existing names. The registrar will approve the name only if the name is not undesirable in the opinion of the Central Government and does not resemble any existing partnership firm or an LLP or a body corporate or a trademark. The form RUN-LLP has to be accompanied by fees which may be either approved/rejected by the registrar. A re-submission of the form shall be allowed to be made within 15 days for rectifying the defects. There is a provision to provide for 2 proposed names of the LLP.
Step 3: Incorporation/Formation of LLP
- The form used for incorporation is FiLLiP(Form for incorporation of Limited Liability Partnership) which shall be filed with the Registrar who has jurisdiction over the state in which the registered office of the LLP is situated. The form will be an integrated form.
- This form also provides for applying for allotment of DPIN, if an individual who is to be appointed as a designated partner does not have a DPIN or DIN.
- The application for allotment shall be allowed to be made by two individuals only.
- The application for the reservation may be made through FiLLiP too.
- If the name that is applied for is approved, then this approved and reserved name shall be filled as the proposed name of the LLP.
- After the Registrar approves the proposed LLP, it will issue a Certificate of Incorporation in digital form. Please note that currently, no physical certificate is issued by the Registrar.
Step 4: File Limited Liability Partnership Agreement
- LLP agreement governs the mutual rights and duties amongst the partners and also between the LLP and its partners.
- LLP agreement must be filed in form 3 online on the portal of Ministry of Corporate Affairs (MCA)
- It is mandatory that Form 3 for LLP agreement must be filed within 30 days of the date of incorporation, otherwise, penalties will occur for non-filing.
- The LLP Agreement has to be printed on Stamp Paper. The value of Stamp Paper is different for every state.
Step 5: File PAN and TAN Application
As the LLP registration procedure is completed, the applicants need to file the PAN and TAN Application online/offline on the portal of NSDL for the newly registered LLP after providing all the details and relevant documents.
Important Forms in LLP Registration
Have a quick glimpse of the important forms used for LLP
|RUN-LLP (Reserve Unique Name – Limited Liability Partnership)||This form is used for reserving a name for the LLP|
|FiLLiP||This is a primary form used for incorporation of LLP|
|Form 5||It is used to give notice for change of name|
|Form 17||Application and statement for the conversion of a firm into LLP|
|Form 18||Application and Statement for conversion of a private company or unlisted public company into LLP|
What are the compliances to be done after registration of LLP?
Compliances can be divided under two categories:
- Post Incorporation Compliances
As soon as the LLP registration is done, the newly incorporated LLP is expected to complete following one time compliances.
- Filing of LLP Agreement
- Application for PAN & TAN
- Opening Bank Account
- Annual Compliances
An LLP is expected to comply with the annual compliance requirements. These compliances are compulsory to meet regardless of the fact that the firm has been started or not. If the number of transactions after the LLP registration is 0, then LLP will record NIL return.
Following returns need to be filed:
- Statement of Account & Solvency
- LLP Annual Return
- Income Tax Return
How can we help in getting registration?
With Registration SEVA, forming an LLP is quite easy and the process is very smooth. We believe in making entire registration and compliance procedure flexible for you so that you can avail unlimited number of benefits. Few of the reasons of choosing us are:
- India’s first premium service provider with minimal fees
- We help in providing DSC for all partners
- We provide free consultation followed by subsequent meetings
- Complete support on opening a Bank Current Account
- On-time updates and real time status tracking
- 24*7 Customer support
- Less time in forming LLP
- Strong Team of Lawyers, CA, CS etc.
01.What is an LLP?
- LLP is an alternative corporate business form that gives the benefits of limited liability of a company and the flexibility of a partnership
- The LLP can continue its existence irrespective of changes in partners. It is capable of entering into contracts and holding property in its own name.
- The LLP is a separate legal entity, is liable to the full extent of its assets but liability of the partners is limited to their agreed contribution in the LLP.
- Further, no partner is liable on account of the independent or un-authorized actions of other partners, thus individual partners are shielded from joint liability created by another partner’s wrongful business decisions or misconduct.
- Mutual rights and duties of the partners within a LLP are governed by an agreement between the partners or between the partners and the LLP as the case may be.
02 What are the advantages of an LLP kind of business?
LLP form is a form of business model which:
- is organized and operates on the basis of an agreement.
- provides flexibility without imposing detailed legal and procedural requirements
- enables professional/technical expertise and initiative to combine with financial risk taking capacity in an innovative and efficient manner
03. Are there any other countries where LLP kind of entity is available?
The LLP structure is available in countries like United Kingdom, United States of America, various Gulf countries, Australia and Singapore. On the advice of experts who have studied LLP legislations in various countries, the LLP Act is broadly based on UK LLP Act 2000 and Singapore LLP Act 2005. Both these Acts allow creation of LLPs in a body corporate form i.e. as a separate legal entity, separate from its partners/members.
4. What is the difference between LLP and a Company?
- A basic difference between an LLP and a joint stock company lies in that the internal governance structure of a company is regulated by Companies Act, 2013 whereas for an LLP it would be by a contractual agreement between partners
- The management-ownership divide characteristic in a company is not there in a limited liability partnership.
- LLP has more flexibility as compared to a company.
LLP has lesser compliance requirements as compared to a company.
5. What are the basic requirements to register an LLP?
There must be at least two individuals to be appointed as Designated Partners, out of which one must be an Indian resident. Also, there should be an address of a business in India so as to register it as a registered office for your LLP.
6. What is the LLP Agreement?
LLP Agreement describes the internal constitution of the partnership, overall mission, vision, business objectives of the organization firm in long run.
7. Within how many days of incorporation do I need to file LLP Agreement?
You need to file it within 30 days of the incorporation of the LLP.
8. Is there any penalty for non-filing of LLP Agreement?
Yes, if one fails to file the LLP Agreement within 30 days of the formation of the LLP, heavy penalty is levied i.e. Rs.100 per day of default with no ceiling on the maximum fine.
9. How much time does it take to register an LLP in India?
Registration SEVA is the only premium service provider in India which helps to register an LLP within 7-10 business working days.
10. Who is responsible for the compliances of LLP?
As per the provision of LLP Act, 2008, the designated partners are responsible for the all the LLP compliances and such related matters.
11. What is the difference between Partners and Designated Partners?
Any number of people can be appointed as a partner but at least 2 people must be named as a designated partner. Designated partners are responsible for doing all the necessary act and make sure that all the provisions are adhered to and compliances are done on time. In case of any default, such designated partners are liable to pay off penalties imposed on LLPs.
12. What is Contribution in LLP?
Whatever partners to an LLP contribute to it to run the business is termed as a contribution. Contribution can be in the form of any of the following:
- Promissory notes
- Tangible or Intangible Property
- Movable or immovable property etc.