Limited Liability Partnership

Limited Liability Partnership Registration in India

A Limited Liability Partnership (LLP) is a distinctive business structure that combines elements of both partnerships and companies. Within an LLP, partners enjoy limited liability akin to shareholders in a company, alongside the flexibility and simplicity characteristic of partnerships. This arrangement grants the LLP its own legal persona, enabling it to engage in legal actions and be subject to legal proceedings independently of its partners. LLPs have gained popularity among entrepreneurs across various industries due to their ability to safeguard partners’ assets and their simplified regulatory requirements compared to traditional corporations. Introduced in India in 2008, the concept of LLP is governed by the Limited Liability Partnership Act, offering a reliable and adaptable option for businesses of all scales.

Documents Required for LLP Registration

6. PAN Card/ID Proof of Partners: Voter’s ID, Passport, Driver’s License, or Aadhar Card.
7. Residence Proof of Partners: Bank statement, telephone bill, mobile bill, electricity bill, or gas bill from the last 2-3 months.
8. Passport-size Photograph: Passport-size photograph with a white background.
9. For Foreign Nationals and NRIs: Foreign nationals and NRIs intending to partner submit their passport. Additionally, proof of address, such as a driving license, bank statement, residence card, or any government-issued identity proof containing the address, is required.
10. Proof of Registered Office Address:Rent agreement and a NOC if the office space is rented. A recent utility bill (gas, electricity, or telephone) with the complete address and owner’s name should not be two months older
11. Digital Signature Certificate (DSC): At least one designated partner must have a DSC for digitally signing documents.

Steps for Limited Liability Partnership Registration

1. Obtain a Digital Signature Certificate (DSC)
2. A DSC is a digital method of verifying or attesting a document obtained through any Government Certifying Agencies (CAs) with either one-year or two-year validity.
3. It can be taken by Aadhar e-KYC-based verification or through the help of supporting documents like PAN, identity proof, address proof, etc.
4. Name Approval
5. Reserve an LLP’s name using the LLP-RUN form (Limited Liability Partnership – Reserve Unique Name). This web service used for the registration of LLP is overseen by the Central Registration Centre, which serves as the nodal authority.
6. There is a provision for the LLP to have two proposed names.
7. LLP Registration
8. Fill out the FiLLiP (Form for Incorporation of Limited Liability Partnership) and submit it to the Registrar where the LLP’s registered office is located.
9. As a part of additional documentation, submit the Subscriber sheet and consent of a Director (Form DIR-9) alongside FiLLiP.
10. Subscriber Sheet serves as legal evidence of the agreement of initial members or shareholders to participate in the partnership. It helps in establishing the initial ownership structure.
11. Submit LLP Agreement
12. File the LLP Agreement using Form 3 on the MCA portal within 30 days of the LLP being registered.
13. The agreement governs the mutual rights and responsibilities of the partners of the LLP.
14. Obtain a Certificate of Incorporation
15. Once forms and documents are filed and verified, the Registrar of Companies (RoC) will issue the Certificate of Incorporation, officially recognizing the LLP’s existence.
16. Apply for PAN and TAN
17. After obtaining the Certificate of Incorporation, apply for the Permanent Account Number (PAN) and TAN for the LLP.
18. You can successfully register your LLP and embark on your entrepreneurial venture by following these steps diligently.

Compliances for Limited Liability Partnership

For Partners

An LLP requires a minimum of two partners for formation, with no specified upper limit on the maximum number of partners, offering flexibility and scalability for businesses.

For Limited Liability Partnership

1. LLPs must submit their LLP agreement within 30 days of incorporation; failure to do so incurs a penalty of Rs 100 per day.
2. File the form DIR3 for the DIN allotment in case of an existing company.
3. LLPs are required to file two annual statements using Forms 11 and 8 for Annual Return and Statement of Accounts and Solvency, respectively
4. Sign, verify, and file the Income Tax Return (ITR) annually.
5. You and your partner must deposit contributions into the relevant bank account within the specified timeframe, depending on your shareholding capacity.
6. Get a GST registration since it is a legal compulsion per the GST Act.
7. Audit your accounts through CAs if the company’s annual turnover exceeds Rs 40 lakhs or the contribution surpasses Rs 25 lakhs of the threshold limit.

Minimum Capital Requirement

Limited Liability Partnerships (LLPs) do not have a minimum capital requirement for registration. Partners have the flexibility to determine the capital amount within their LLP agreement, based on mutually agreed-upon ratios. Considering an initial capital of 10,000 rupees is often advisable, serving as a practical starting point for the financial operations of an LLP.

Tax Rates

Limited Liability Partnerships (LLPs) are subject to income tax at a standard fixed rate of 30% on their earnings. For incomes surpassing ₹1 Crore, a 12% surcharge is added to the regular income tax. Additionally, a 4% Health and Education cess is levied on the total income tax plus surcharge amount.

Advantages and Disadvantages of Limited Liability Partnership

Advantages

1. Limited Liability

In an LLP, liability is confined to the partners’ contributions. In the event of insolvency, only the assets of the LLP are used to settle its debts, absolving partners of personal liabilities, a key distinction from sole proprietorships and partnerships.

2. Separate Legal Entity

Upon incorporation, a private limited company attains a distinct legal identity, separate from its owners. As a separate legal entity, the company assumes responsibility for managing its assets, liabilities, debtors, and creditors independently.

3. More straightforward Registration Process and less compliance

Forming and managing an LLP typically incurs lower costs compared to incorporating a Public or Private Limited Company. Additionally, the government imposes fewer restrictions and compliance requirements on LLPs, offering greater flexibility to businesses.

4. No minimum capital contribution

There is no prerequisite for a minimum paid-up capital before incorporation of an LLP. It can be established with any amount of capital contributed by the partners, offering flexibility in capitalization.

5. Perpetual Succession

Limited Liability Partnerships remain unaffected by events such as the death, retirement, or insolvency of partners. In such cases, the LLP is wound up in accordance with the provisions outlined in the Limited Liability Partnership Act of 2008.

6. No maximum limit to the Partners

There is no maximum limit to the partners in an LLP, so multiple partners and contributors can operate under one LLP.

Disadvantages

1. Difficulties in raising capital

LLPs commonly lack the concept of equity or shareholders, posing challenges for Angel investors and venture capitalists to invest as shareholders. Additionally, LLPs cannot issue an Initial Public Offering (IPO) to raise funds from the public.

2. Dissolution of LLP

Dissolving an existing LLP involves a minimum three-month-long process that requires rigorous document filing and fulfillment of various legal obligations. This process can be challenging due to the extended timeline and tedious procedures involved, making it a complex undertaking for partners.

Limited Liability Partnership Registration Number

The Limited Liability Partnership Registration Number, also known as the Limited Liability Partnership Identification Number (LLPIN), is a unique 7-digit alphanumeric code assigned to an LLP upon its registration with the Registrar of Companies (ROC). Example of LLPIN: AAA-1234

How to Get a Registration Number for a Limited Liability Partnership?

Following the approval of the FiLLiP Form, the Registrar of Companies (ROC)  issues the Certificate of Incorporation, a legal document to signify that your company has been successfully registered. The Certificate of Incorporation contains essential details such as the LLP’s name, registration number (LLPIN), date of incorporation, registered office address, etc.

Limited Liability Partnership Registration Time

It typically requires 7-10 days from the date of submission of documents to register a Limited Liability Partnership.

Challenges while incorporating LLP

1. Documentation Errors: Submitting documents with inaccuracies, inconsistencies, or omissions can lead to setbacks.
2. Name Approval Challenges: Opting for a company name that doesn’t comply with naming regulations or is already taken can lead to holdups.
3. MCA Server Glitches: Technical glitches on the MCA website may occasionally surface, causing application submission difficulties or data loss.
4. Response Time: A time limit is often imposed following name approval, within which you must finalize the registration process. Suppose you are unable to submit your application within this timeframe. In that case, you should make a fresh application for name approval.
5. Payment Processing Delays: Delays in payment processing can also affect the registration timeline.

Jurisdiction Variability: Distinct jurisdictions encompass varying processing durations and prerequisites that can influence the speed of your application’s progress.