LLP Registration Online - An Overview
Nowadays, LLP Registration is obtained by various budding entrepreneurs, Law Firms, Auditing Firms, Real Estate Agencies, Financial Advisory Services, Business Consultancies, and Small and Medium-Sized Businesses. The main reason behind this is that the concept of LLP is very prominent. Moreover, it would protect the personal assets in the event of a dispute and also provide various tax benefits.
What is a Limited Liability Partnership?
The term Limited Liability Partnership (LLP) is defined under the Limited Liability Partnership Act, 2008. It means any corporate body incorporated under this act. This business structure is basically a blend of the advantages of a traditional partnership firm and a private limited company and was introduced in India in the year 2010. Further, all the rights and duties concerning the designated partners are governed and administered by the LLP Agreement.
Benefits of LLP Registration in India
The following listed are the advantages of 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 incur 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 Transfering Ownership
Unlike the case of a Private Company, transferring ownership to others is pretty much as easy task under the concept of limited liability partnership.
- Corporate Body
Section 3 of the Limited LLP Act, 2008, states that for obtaining LLP registration, a firm is considered as 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 that, 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 working 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 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 the incorporation of an LLP firm is 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 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
Form Required for LLP Registration
The following listed are the documents required for the process of obtaining registration of LLP:
This form is required for the reservation of name
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 from the Partners of the concerned LLP:
- PAN Card, Aadhar Card, Voter ID, Driving License of the Partners
- Address Proof of the partners
- Residence Proof of Partners
- Passport (if in case any of the partner is a Foreign National or an NRI)
The following listed documents are required regarding the concerned Limited Liability Partnership:
- 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, water tax receipt (not older than two months)
Procedure for LLP Registration
The following listed are the steps involved in the process of obtaining LLP Registration:
- Filling of the Application for LLP Registration
In the first step the nominated partners as well as the designated partners are required to an online application form for LLP Registration.
- Obtaining DPIN and DSC for LLP
Obtaining DSC (Digital Signature Certificate) DPIN (Designated Partner Identification Number) is mandatory for the process of obtaining registration for LLP. DSC is required by the at least one of the designated partners in order to digitally sign the documents. 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 the third step of obtaining LLP Registration, 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 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 cancel. However, it is noteworthy to note 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.
- Submission of the documents for LLP Registration
In the fourth step, after the ROC approves the name, the nominated partners and the designated partners are required to submit all the documents needed for the registration of LLP. These documents involve Aadhar Card., PAN Card, Photograph, Address Proof, etc.
- Drafting of LLP Agreement
After duly submitting all the required documents, the partners are then required to draft an LLP Agreement stating all the role, responsibilities and duties of the partners concerned. Further, it is significant to note that the said LLP Agreement is required to be filed within a period of 30 days in Form 3 either online on the MCA portal or to the concerned ROC.
- LLP Registration Certificate
In the last step, the partners concerned are required to apply for the Certificate for the registration of LLP together with the LLPIN (Limited Liability Partnership Identification Number).
Points to consider before selecting a Name for LLP
The following listed are the points that must be taken into consideration while deciding 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 in 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 word like bank, finance, mutual fund, and insurance etc.
LLP Registration Fees in India
The following listed are the government fees incurred in the process of registering an LLP Firm:
Step 1 – DSC (Digital Signature Certificate)
Approximately Rs 1500 to 2000 for two partners (varies depending on the agency)
Step 2 – DIN (Director Identification Number)
Rs 1000 for two partners
Step 3 – Name Reservation
Step 4 – Incorporation
Depends on the capital contributed
Contribution between Rs 500 to 1 lakh
Contribution between Rs 2000 to 1 and 5 lakhs
Step 5 – LLP Agreement
Depends on capital contribution
Contribution between Rs 50 up to 1 lakh for filing Form
and stamp duty on the basis of the regulations made by the state where the said LLP is formed
Post Incorporation Compliance Requirements for an LLP
Once registration of a Limited Liability partnership is complete, the newly incorporated LLP is then expected to abide by the following listed compliances. Further, it is noteworthy to note that these are one-time compliances and hence are not repeated:
- Filling 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
Provisions of 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, Rs. 100 per day will be charged as 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, Rs. 100 per day will be charged as penalty.
- The LLP is required to file an income tax return (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.