Limited Liability Partnership (LLP)
Limited Liability Partnership (LLP)
LLP was launched in India by way of the Limited Liability Partnership Act, 2008. The main edge of a Limited Liability Partnership is one partner is not liable for another partner’s misconduct or negligence. LLP is favoured by Professionals, Micro and Small businesses that are family-owned or closely-held.
Limited Liability partnership offers the benefit of limited liability to its owners and at the same time needs minimal maintenance. The owners of a private limited company have limited liability to creditors. In case of default, banks/creditors can only sell the company’s assets and not the personal assets of directors.
An LLP also gives limited liability protection for the owners from the debts of the LLP. Accordingly, all partners in an LLP enjoy a kind of limited liability protection for every individual’s protection within the partnership, related to that of the shareholders of a private limited company.
Choose LLP because
- Dual advantages- Company and a Partnership
- No partner will be responsible for other partner’s misconduct
- Cheaper to incorporate than a private limited company
- Limits the liabilities of its partners
What Is Included In Our LLP Registration Package?
- DPIN for 2 Partners
- Digital Signature For 2 Partners
- Name search & approval
- LLP Agreement
- ROC Fees & Pan Card
- Free accounting software & GST filing
Procedure For LLP Registration
Factors to Consider While Selecting an LLP Name
The Registrar of Companies (RoC) has issued naming guidelines for LLPs. You must follow the rules closely or your application may end up getting rejected, leading to a much longer process.
The name of your LLP company should be linked to your business. It must suit the company’s branding. For example, Lilliput means small the Lilliput is kid clothing brand.
Short & Simple
The name of LLP must be short and not be too long. Easy pronunciation for people and they can remember the company name at first go.
Name of your company should not be identical or alike to an existing company, business or trademark. You can go to search.legalraasta.com to verify if your company name is the same to others. You must ideally avoid plural version e.g., “Amazon’s” or changing just letter Case, spacing or punctuation marks in an existing company name.
Abstracts, adjectives and generic words are denied. So XYZ would be denied, as would Good Quality Biscuits. The words bank, exchange and stock exchange would also be denied.
No same Trademarks
There should not be a certified trademark by the identical name on the IP India website. If there is 1, the name can just be approved if you can get a NOC from its owner authorising, you to use it then only.
The name of your LLP company must finish with the suffix “LLP” is a case of a limited liability partnership.
This means the word like” research” is a scientific word used in a company name of research it can be used in technical business, company’s name. You cannot use them in the name of the food chain as it is doesn’t relate to it.
Should not be illegal or offensive
While picking up an LLP name make sure u don’t go against the law. It should not be abusive or against the customs and beliefs of any religion and doesn’t harm anyone respect.
Steps to form an LLP
Step 1: Digital Signature Certificate (DSC)
Before starting the process of registration, you must enrol for the DSC of the designated partners of the proposed LLP. Applying for DSc is important because the registration process of LLP is done online and requires to be digitally signed.
So, the LLP partners must get the DSC from government-approved certifying agencies.
Step 2: Application of DIN (Director Identification Number) and DPIN ( Designated Partner Identification Number)
After applying for DSC the next step is to enrol for DPIN and DIN application for the proposed Partners of the LLP. Within a timeframe of 5 to 7 working days, DPIN and DIN. The application for allotment of DIN has to be made in Form DIR-3. You have to add the scanned copy of Aadhaar and PAN to the form. The form needs to be signed by a Company Secretary in full- time employment of the company or by the Managing Director, Director or CEO of the existing company in which the candidate shall be designated as a director.
Step 3: Name Approval and Reservation with ROC
LLP-RUN i.e. Limited Liability Partnership-Reserve Unique Name needs to registered for the reservation of name of proposed LLP. This is further treated by the Central Registration Centre under Non-STP. But before circulating the name in the form, it is suggested that you use the free name search facility on LegalRaasta portal. The system will give the list of exactly resembling names of existing LLPs. 1-6 is the limit proposed names are expected to be given to the MCA. The registrar will approve the name only if the name is not useless in the opinion of the Central Government and does not match any existing partnership firm or an LLP.
The Name approval process will take 5 to 7 working days. A re-submission of the form is made15 days in case of rejection.
Step 4: MOA & AOA submission
Once the name is approved, one requires to draft Memorandum of association and Articles of Associate. Both MOA and AOA are registered with the MCA with the agreement statement.
Step 5: Get Incorporation Certificate of LLP
The form used for incorporation is FiLLiP(Form for incorporation of Limited Liability Partnership) which must be registered with the Registrar who has jurisdiction over the state in which the registered office of the LLP is located. The form will be an integrated form. Incorporation documents can be presented to the MCA along with an application for incorporation. MCA will approve the application for incorporation within 5 to 7 days. Incorporation certification is proof that the company has been formed. It also involves your CIN number.
Step 6: Appeal for PAN, TAN and Bank account
Then you require to apply for PAN and TAN. PAN and TAN and receive in 7 working days. You can submit the Incorporation certificate, MOA, AOA and PAN with the bank for opening your bank account.
Step 7: Register for LLP Agreement
LLP agreement oversees the mutual rights and duties between the LLP and its partners.LLP agreement must be registered in Form 3 which is to be filled in 30 days of the date of incorporation.
Eligibility For LLP Registration
Minimum 2 Partners (18 years and above age)
No Capital Requirement
At least one Designated Partner as Indian Resident
DPIN for all Partners
Why choose LLP Registration?
- It has a separate legal entity, unlike partnership firms.
- The liability and responsibility of every partner are limited to the contribution made by the partner.
- An LLP has ‘perpetual succession’, that is extended survival until it is brought into end by mutual agreement between the partners.
- The cost of forming an LLP is low.
- Audit not required as LLPs are medium and small businesses who want to have minimal regulatory compliance linked to formalities.
- Less agreement and regulations in the formation of LLP.
- No terms for minimum capital contribution.
- The ownership of an LLP can be easily shifted to another person. All you require is to recruit them as a Designated Partner of the LLP.
The least number of partners to incorporate an LLP is 2 and the maximum has no limit. The powers and responsibilities of designated partners are administered by the LLP agreement. They are straight responsible for the compliance of all the provisions of LLP Act 2008 and terms defined in LLP agreement.
If you want to commence your company with Limited Liability Partnership, then you must get it enrolled under the Limited liability Partnership Act, 2008.
Documents Required For LLP Registration
- Copy of PAN Card of partners
- Passport size photograph of partners
- Copy of Aadhaar Card/ Voter identity card/ Driver’s license as address proof
- Electricity/ Water bill/ Telphone bill/ Latest bank statement as proof of Registered Office (Business Place)
- Copy of Sale Deed/Property Deed (If owned property)
- Landlord NOC (Format will be provided)
- Passport (in case of Foreign Nationals/ NRIs)
- Digital Signature Certificate
- Copy of Notarised Rental Agreement
- Copy of NOC from the property owner
Important forms in LLP Registration
- RUN – LLP Reserve Unique Name-Limited Liability Partnership- A form for reserving a name for the LLP
- FiLLiP – A Form for incorporation of LLP
- Form 5- 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
Checklist: If your company qualifies for LLP in India
For any form of company, certain specific conditions must be fulfilled to be available for registering as an LLP
Any company who has:
- A minimum of 2 partners. There is no boundary to the maximum number of partners
- The nomination of a natural person, if a body corporate is a Partner.
- No shared capital requirement, though each partner has to contribute towards it.
- Minimum capital contribution: There is no minimum capital demand for an LLP (or a company, for that matter). The LLP should have an approved capital of Rs. 1 lakh.
- Minimum 1 Designated Partner as resident of India.
- DPIN for all Partners
- DSC for all the Designated Partners
- Address proof of the Registered office of LLP. Even a rented home can be the registered office, so long as a NOC is obtained from the landlord.
What are the Compliance Requirements after an LLP Company Registration in India?
Once Limited Liability partnership registration is done the newly incorporated LLP is expected to finish following compliances. These compliances are one time in nature and are not repeated.
1. Partnership Agreement Filing
2. Apply for PAN & TAN
3. Open Bank Account
Annual Compliances Requirements after the LLP Registration
After the finish of the formation process, LLP is expected to comply with the annual compliance requirements. These compliances are compulsory to meet irrespective of the fact that they have started a company or not. If the number of transactions after the LLP registration is 0, then LLP will record NIL return.
Following returns are expected to be registered:
1. Statement of Account & Solvency
2. LLP Annual Return
3. Income Tax Return
Concerns Related To Private Limited Company
- Pvt. Ltd company requires few more ROC compliance translating into an additional cost of 5000 to 10000/annum.
- Minimum capital required is Rs.100,000
- Private limited company can have a maximum of 200 members.
Still, entrepreneurs prefer private limited for the ease in share transfer and potential for future growth.
Penalties Provisions in LLP annual compliance default
According to Limited liability partnership Act 2008, it is compulsory to register all the prescribed compliance yearly. There is a provision for a penalty in case of any failure in registering Form 8 and Form 11 for reporting LLP’s financial statements and annual return. A fixed amount of Rs. 100 per day for each agreement that is not registered. No maximum limit is specified.
Every registered LLP is expected to do Income tax return filing with Annual filing. This filing should be done by 30th September all year. After LLP registration, any LLP fails to reach this deadline then a penalty of Rs. 5,000 is forced on it and filing is to be made by 31st December of that year. If the LLP fails to reach this deadline, then the penalty amount will is double i.e Rs. 10,000.