LLP stands for Limited liability partnership that provides limited liability protection to members associated with the company. Limited liability partnership (LLP) is considered to be the finest form of business...
The biggest challenge which incurs in a business partnership is that the inefficiency of a partner affects the progress of others. However, Limited Liability Partnership or LLP nullifies any such risk. It encourages entrepreneurs to commence joint ventures at the lowest liability. Moreover, it is the safest form of doing business for startups or small firms. Limited Liability Partnership Act, 2008 regulates the activities of a corporate partnership body and ensures its smooth operations. If you also choose LLP, then you should be well-versed with the LLP registration procedure. Needless to worry, this blog will help you usher your doubts in regards to LLP registration.
Fundamental Features of LLP
Here are the characteristics of a Limited Liability Partnership:
- The key aspect of an LLP is that it is a separate legal entity; thus, its existence is different from the Members.
- Members leverage organizational flexibility of a partnership through LLP agreement.
- Note that LLP agreement is a private document which needs to remain confidential to the Members.
- There must be at least two “designated” members to start an LLP.
- The “trading disclosure” of an LLP is similar to those of a company.
- Also, LLPs has the same accounting and filing requirements as companies.
- Each member of an LLP is liable for tax in their share of the income & gains.
- An LLP can issue debentures on fixed charges or floating charges over similar to that of a company.
- A Limited Liability Partnership must get registered at Companies House.
- Lastly, the members of an LLP have the benefit of limited liability
Benefits of LLP Registration over Private Limited Company Registration
In case, you are in a dilemma whether to opt for LLP registration procedure or Private Limited Company registration, take a look at the benefits of the former:
No limit of the maximum number of partners: it requires a minimum of 2 partners to form an LLP, and there is no limit on maximum partners. On the other hand, a Private Limited Company has confined to have not more than 200 members.
Low cost of formation: LLP registration procedure cost is comparatively low to the incorporation of a Public Limited company. The LLP cost ranges from Rs. 1500/- to approx. Rs. 7000/- whereas, the minimum statutory fee for Private Company is Rs. 6000/-.
Least capital requirement: The most considerable head start of LLP over Private Limited Company is that one requires the least capital to establish the business. Further, the contribution of a partner may comprise of tangible or intangible, movable or immovable property.
No compulsion for auditing: any company, whether private or public, must get their accounts audited. Despite that, in case of LLP, there is no such compulsion. As per the provisions of the Limited Liability Partnership Act, 2008 LLPs has to audit their account annually expect those who have a turnover less than Rs. 40 lacs or Rs. 25 lacs contribution in any financial year.
Less compliance burden: LLPs have to face less compliance burden in contrast to Private Company. Since an LLP only has to file two statements, i.e. the Annual Return & Statement of Accounts and Solvency, unlike private companies which require to meet at least 8 to 10 regulatory formalities and compliance.
Eligibility Criteria to succeed LLP Registration Procedure
An LLP applicant must fulfill these requirements of LLP registration:
- Ensure to have a minimum of two designated partners;
- Further, one of the partners must be a resident of India;
- All the designated partners must possess a DPIN (Designated Partners Identification Number);
- Every designated partner requires to hold (Digital Signature Certificate) DSC;
- The applicant must provide an address proof of the proposed registered office.
Step by Step LLP Registration Procedure in India
- Step 1- Acquire the Digital Signature Certificate (DSC)
- Step 2: Apply for DPIN
- Step 3: Get the Company’s Name Approval
- Step 4: File Incorporation Application in e-form FiLLiP
- Step 5: File LLP Agreement in Form 3
Once you pass the eligibility criteria, you have to follow these steps for LLP registration:
Step 1- Acquire the Digital Signature Certificate (DSC)
The first and foremost step is to obtain DSC for all the proposed designated partners. The members can utilize the same DSC to file ROC (Registrar of Companies) compliance forms, LLP registration, and tax returns.
Step 2: Apply for DPIN
The next step includes filing an application for Designated Partners Identification Number (DPIN) in e-form DIR 3.
Step 3: Get the Company’s Name Approval
It is a significant step in the LLP Registration Procedure. An LLP should have a unique name; otherwise, there are chances of application rejection. So once you obtain DSC and DPIN, file for company’s name approval. To do so, visit the official MCA portal RUN-LLP to ROC (Registrar of Companies).
Step 4: File Incorporation Application in e-form FiLLiP
After the ROC (Registrar of Companies) approves the company’s name, you need to file an incorporation application in the e-form FiLLiP. The FiLLiP form entails all the information about the proposed designated partners. Affix all the essential documents along with the form. The applicant must file the form with the ROC of the concerned state or area where the registered LLP office is situated.
Step 5: File LLP Agreement in Form 3
Lastly, file the online LLP agreement on the MCA portal within 30 days from the date of incorporation. The LLP agreement is a confidential document which defines the rights and responsibilities of the partners. Also, it must be duly signed on a stamp of Rs. 10/- while the value of stamp paper may differ from state to state.
Incorporate the following clauses in your LLP agreement:
- Name, Object and Register Office of your LLP company;
- Valuation of Non-Monetary contribution;
- The sharing ratios of net profits or losses;
- Detail of designated partners;
- Interest payable on the capital loan;
- Mode of operation of bank accounts;
- Rights and duties of all partners;
- Procedure to appoint an Auditor;
- Partner’s initial contribution to the LLP;
- Appointment of an arbitrator;
- Further prepare Indemnity clause and Goodwill clause;
- Admission of a new partner;
- Cessation of the existing partners;
- The procedure of winding up the Limited Liability Partnership;
- Also, specify liability of partners in the LLP with its extent.
- Remuneration payable to the working partners;
- Amendments of Limited Liability Partnership;
- And details of other businesses, if carried.
Also, Read: Benefits of LLP over Private Limited Company.