An Overview of LLP Registration
LLP or Limited Liability Partnership is one of the most preferred organisations among entrepreneurs as it incorporates the benefits of both the company and the partnership firm into a single form of Organisation. In India, the idea of LLP was introduced in 2009 and an LLP has the characteristics of both the company & the partnership firm. The LLP Act, 2008 regulated the Limited Liability Partnership in India. A minimum of 2 partners are needed for LLP Registration in India. However, there is no limit on the maximum number of partners of an LLP.
In India, it’s easy to manage and register an LLP. The LLP Agreement states the right & duties of the partners. In an LLP, one Partner is not responsible for the misconduct & negligence of the other Partner. The partners are responsible for the compliances & all the provisions that are specified in the LLP Agreement.
Benefits of LLP Registration in India
The following listed are the advantages of a Limited Liability Partnership in India:
- Separate Legal Entity
A limited liability partnership or an LLP enjoys the status of a separate legal entity distinct from its members.
- Limited Liability
The term “Limited Liability" denotes that the liability of each and every member is limited to the extent of the amount contributed by them. On the other hand, this also means that if in case the said LLP firm incurs any losses, then the personal assets of the partners will not be confiscated. Hence, the partners are made liable to the extent of their respective contributions.
- Ease in Transferring Ownership
Unlike the case of a Private Company, transferring ownership to others is pretty much easy under the concept of a Limited Liability Partnership.
- Corporate Body
Section 3 of the Limited LLP Act, 2008 states that for obtaining LLP Registration, a firm is considered a corporate body.
- Perpetual Succession
A Limited Liability Partnership (LLP) has a feature of perpetual succession, which means the entry of a new member and exit of an existing member will not affect the existence of an LLP firm.
- No Minimum Capital Requirement
Two people can easily start an LLP firm, too, without any amount in their pocket, as no minimum capital requirement has been prescribed under the act regarding the incorporation of an LLP firm.
- LLP Agreement
LLP agreement is a printed stamp paper duly signed by all the partners. This agreement defines the roles, responsibilities, and duties of every Partner in the firm. Moreover, the LLP agreement also helps the firm in the process of decision-making.
- No Audit Requirement
One more significant advantage annexed with the concept of LLP is that there is no audit requirement. However, there are two conditions in which there is an audit requirement:
- Whenever the annual turnover of the concerned business exceeds the threshold of Rs 40 lakhs, or
- If in case the capital contribution exceeds Rs 25 lakhs.
- Simple Registration Process
The process of obtaining LLP Registration has been simplified by the MCA (Ministry of Corporate Affairs) by making it an online process. Hence, all the required documents can now be filed electronically on the MCA Portal.
- Easy to wind up
Not only is incorporating an LLP firm an easy task, but also the process of winding up. Hence, an LLP firm can easily be wound up in comparison to a Private Limited Company.
Minimum Requirements for LLP Registration
The following listed are the requirements that are to be adhered to before incorporating an LLP Firm:
- Minimum of two Designated Partners;
- Out of all the designated partners, one must be an Indian Citizen;
- All the designated partners have the Designated Partner Identification Number (DPIN);
- Every designated Partner must hold the Digital Signature Certificate (DSC);
- Address proof of the registered office is a must for obtaining LLP Registration;
- LLP Agreement between the Partners;
- Capital Contribution by the Partners;
- Name of the LLP, which is not identical to any existing LLP or Trademark.
Different Forms Required for LLP Registration
- RUN-LLP: This form is required for the reservation of name.
- FiLLiP: This form is required for incorporating LLP.
- Form 5: A notice for the change of name.
- Form 17: Application form for the conversion of a firm into an LLP.
- Form 18: Application form for the conversion of a Public Limited Company into an LLP.
Documents Required for LLP Registration
The following listed documents are required for LLP Registration in India:
- PAN Card, Aadhar Card, Voter ID, Driving License of the Partners;
- Address Proof of the Partners;
- Residence Proof of Partners;
- Latest photographs of all the Partners;
- Passport (if in case any of the Partners is a Foreign National or an NRI);
- Address Proof of the Registered Office;
- Digital Signature Certificate;
- No-Objection from the Landlord whose place has been used as the Registered Office;
- Utility Bill in the form of electricity bill and water tax receipt (not older than two months).
Procedure for LLP Registration of India
The following listed are the steps involved in the process of obtaining LLP Registration:
- Obtain DPIN and DSC for LLP: Obtaining DSC (Digital Signature Certificate) and DPIN (Designated Partner Identification Number) is mandatory for the process of obtaining registration for LLP. DSC is required by at least one of the designated partners to sign the documents digitally. Further, all the designated partners are mandatorily required to obtain DPIN and the same can be acquired by filing DIR-3.
- Verification and Name Approval: In this step, the partners are required to reserve a unique name for the firm. Further, for reserving the firm's name, the partners are required to file an LLP-RUN form. Furthermore, the name suggested will be reserved by the MCA for 90 days; if in case the process of LLP Incorporation is not within 90 days the said reservation will stand cancelled. However, it is important that the said name must note be offensive and already existing in nature. Lastly, a maximum of two names can be proposed by the partners to the ROC by way of filling RUN.
- Incorporation of LLP: The form used for LLP Registration is FiLLiP which shall be filed with the Registrar, who has jurisdiction over the particular state in which the registered office of the LLP is situated. The form will be an integrated form. FiLLiP Form also provides for applying for allotment of DPIN if a person who is to be appointed as a designated partner doesn't have a DPIN. The application for the reservation may be made via FiLLiP, too and the application for the allotment shall be allowed to be made by 2 individuals only.
- Drafting of LLP Agreement: After duly submitting all the required documents, the partners are then required to draft an LLP Agreement stating all the roles & responsibilities of the concerned partners. Further, it is significant to note that the said LLP Agreement must be filed within 30 days in Form 3 either online on the MCA portal or to the concerned ROC.
Points to consider before selecting a Name for LLP
The following listed are the points that must be taken into consideration while deciding on a name for the concerned LLP:
- Easy to Remember;
- Short and Simple;
- Unique in nature;
- Linked to affairs of the concerned business, i.e., must establish branding and trademark;
- Shall not be offensive to any religion, caste, sex, creed, community and society;
- Must not be against the Public Policy;
- Must not be contrary to the Local/State/Central Government;
- Shall not be similar to the name of any existing LLP;
- Must not include any prohibited word or character;
- Prior approval from SEBI, RBI, IRDA is required if in case the said name includes words like bank, finance, mutual fund, and insurance etc.
Post-Incorporation LLP Compliances
Once Registration of a Limited Liability Partnership is completed, the newly incorporated LLP must complete the following LLP compliances:
- Annual Filing of LLP Agreement;
- Apply for PAN (Permanent Account Number) and TAN (Tax Deduction Account Number);
- Opening of a Bank Account.
Annual Compliance Requirements for an LLP:
The following listed compliances are mandatory and obligatory for an LLP Firm to meet irrespective of the fact they have started their affairs or not:
- Statement of Account and Solvency;
- LLP Annual Return;
- Income Tax Return.
Penalty in case of Non-Compliance for LLP
- As per Section 35 of the LLP Act, 2008, the concerned LLP is required to file Form 11 with the ROC for Annual Return within a period of 60 days. Further, in the case of the non-filing, 100 per day will be charged as a penalty.
- As per Section 34 of the LLP Act, 2008, the concerned LLP is required to file Form 8 for a statement of Account and Solvency within a period of 30 days. In the case of the non-filing, 100 per day will be charged as a penalty.
- The LLP is required to file an ITR in ITR-5. In the case of the non-filing of the annual return, the penalty is imposed on the LLP.
Frequently Asked Questions
In India, some of the examples of Limited Liability Partnership (LLP) are Law Firms, Auditing Firms, Financial Advisory Services, Real Estate Agencies, and Business Consultancies.
The term LLC means a limited liability company. It is similar to a private or public limited company; however, the concept of this business structure is not applicable in India. Whereas, LLP stands for Limited Liability Partnership, it is a hybrid structure of a private limited company and a partnership firm prevalent in India.
The concept of a Limited Liability Partnership is a combination of a Private Limited Company and a Partnership Firm. In India, it is one of the most chosen business structures by embryonic entrepreneurs. It includes the benefits, features and privileges of both a Private Limited Company and a Partnership firm. Further, all the rights and duties concerning the designated partners are governed and administered by the LLP Agreement.
In India, the advantages of a limited liability partnership include a separate legal entity, limited liability, low cost of incorporation, fewer compliances and regulations, and no set limit on the minimum capital requirement.
The disadvantages of a limited liability partnership can be summarised as the inability to raise venture capitalist funding, the imposition of high taxes in case of non- compliance, the higher rate income tax in comparison to other business structures, and failure to have equity investment.
In India, LLP is one of the most preferred business formats for budding entrepreneurs as it incorporates the benefits and privileges of both a Private Limited Company and a Partnership firm. Further, an LLP can easily be incorporated by two people who wish to carry out a lawful business to earn profit. Therefore, any entity that has the objective of not carrying out a business with a profit-earning motive cannot form an LLP, for example, a Trust, NGO, etc.
Nowadays, the concept of LLP is very prominent as it protects the personal assets of the partners in the event of a dispute and provides various tax benefits. Since partner has a dedicated and specified role, the management of a law firm in the form of an LLP becomes easier. Hence, most of the law firms have opted for this model since when was introduced in India.
Yes, the concept of LLP is better than a Company. The reasons why an LLP is better than a Company include limited liability, more credibility, various tax advantages, fewer compliances, lower cost of incorporation, no set limit on the maximum number of partners.
Yes, GST is applicable over LLP as it is a separate legal entity. An LLP has its own unique named PAN Card which makes GST registration of LLP necessary. Moreover, there are several other conditions concerning GST registration eligibility which are applicable to an LLP. If an LLP falls under the ambit of any of these parameters, it mandatorily needs to obtain GST registration in India.
In India, for incorporating an LLP, there is no limit prescribed for the minimum capital requirement. Hence, an LLP can be formed with the least possible capital. Moreover, the contribution made by a partner usually consists of tangible or movable and immovable or intangible property or any other benefits to the LLP.
Any individual or a body corporate can become a partner in a Limited Liability Partnership. However, an individual shall not qualify to become a partner if he/she has been declared as of unsound mind by the court or an undischarged insolvent. Moreover, an individual who has filed the application for adjudicating someone as an insolvent in an ongoing case is also not eligible to become a partner in an LLP.
Yes, getting an Audit done is compulsory under the LLP Act, 2008. However, it is significant to note that only those LLPs whose annual turnover exceeds the threshold of Rs. 40 lakhs or whose capital contribution exceeds the limit of Rs 25 lakhs are obligated to get their accounts, and financial statements audited.
Yes, obtaining LLP registration under the provisions of the Limited Liability Act, 2008, is compulsory for an LLP firm.
No, it is not mandatory to appoint a Company Secretary in an LLP for LLP compliances. Also, the LLP Act, 2008 does not contain any provision regarding the appointment of a CS.
The Registrar has absolute power with respect to demanding any information, which he may deem fit to carry out the duties according to the LLP Act, 2008 and LLP annual compliance provisions. The Registrar has the power to summon a designated partner or any such concerned person. One must also maintain all the documents pertaining to the LLP incorporation so that they are readily available for the inspection by the inspection’s authorities.
A limited liability partnership needs to file its LLP agreement online on the MCA’s (Ministry of Corporate Affairs) Portal in Form 3 within 30 days of the date of incorporation. Further, the LLP Agreement has to be printed on Stamp Paper. The value of the Stamp Paper varies from one state to another.
No, an LLP is required to file E-Form 15 at the LLP portal only once. The existing Registrar processes the E-Form and forwards the same to the new Registrar for registration. However, the approval of such E-Form 15 is not allowed in case there is any other E-Form pending for the payment of a fee or is being processed for LLP registration. After approval, the Registrar provides the Certificate for change of registered address.
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The requirements for designated partners include the appointment of at least two DP (Designated Partners) shall be compulsory for all LLPs. Designated Partners are also accountable and answerable for all the regulatory and legal compliances, in addition to their liability as partners.
No, the provisions of the Indian Partnership Act, 1932, do not apply to LLPs. However, the Indian Partnership Act, 1932 is applicable to all Partnership Firms in India.
An LLP is a body corporate and a legal entity separate from its partners, having perpetual succession.
Yes, as per the provisions of Section 60 to 62 of the LLP Act, 2008, LLPs are allowed to carry out mergers and amalgamation. Moreover, these provisions also provide the manner in which compromises or arrangements can take place.
Yes, as per the provisions of the LLP Act 2008, Foreign Nationals, including Foreign Companies and LLPs are allowed to incorporate a Limited Liability Partnership in India, provided at least one DP (Designated Partner) is a resident of India. However, the LLP/Partners would have to abide by all the relevant Foreign Exchange Laws/ Rules/ Guidelines/ Regulations.
A Foreign LLP can establish its place of business in India by filing Form-27 along with the particulars of incorporation of foreign LLP, details of the Designated Partners of that foreign LLP, and details of at least two authorised representatives for obeying the regulation of LLP Act, 2008.
No, the name of an LLP shall end with either the word “Limited Liability Partnership” or “LLP”. Further, the term “limited” shall only be used in the name within “Limited Liability Partnership”.
No, only a private or an unlisted public company can be converted into a Limited Liability Partnership.
Yes, an existing partnership firm is eligible to be converted into a Limited Liability Partnership by adhering to the provisions of Clause (58) and Schedule II of the LLP Act, 2008. Further, a partnership also needs to file Form 17 along with Form 2 for such incorporation and conversion of LLP.
For reserving names, an LLP needs to file LLP Form No. 1 (Application for reservation or change of name) by logging in to the official LLP portal pay the fee specified and attach the digital signature of the DP (Designated Partner) to incorporate an LLP. Further, one also needs to refer to the LLP name availability guidelines specified under section 15 read with Rule-18 of the LLP Rules, 2009.