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Overview of Limited Liability Partnership (LLP) Registration
A limited liability partnership (LLP) refers to a body corporate formed under LLP Act, 2008. It is a legally autonomous entity from that of its partners. Such an entity is liable to the full extent of its assets; however, liability of the partners is restricted to their agreed contribution. And since partners' liability is limited in the LLP, it entails elements of partnership firm structure & a corporate structure.
There is no personal accountability of the partner except in the event of fraud. Furthermore, a partner is not accountable for misconduct or negligence of the associate partner as there the concept of joint liability doesn't work in LLP.
The notion of the Limited Liability Partnership (LLP) found its way to India in the year 2008. At least two partners are needed for LLP incorporation, But there is no upper limit in this context.
Among the partners, there should be at least two designated partners who should be individual, and one of them ought to be an Indian national. The LLP agreement regulates the rights and obligations of such partners. They are accountable for the compliance of all existing provisions of the LLP Act, 2008 & provisions cited in the said agreement.
What is an LLP and How to register an LLP in India?
A Limited Liability Partnership (LLP) is a form of business that offers the combined features of ‘Partnership’ and ‘Limited Company’ business structures. This business form was introduced in India in April 2009 with the enactment of the Limited Liability Partnership Act, 2008. In an LLP, a partner is not responsible or liable for another partner's misconduct or negligence. Instead, all partners have limited liability, limited to their own acts of commission or omission, similar to shareholders’ liabilities in a limited company. However, unlike the shareholders in a company, LLP partners have the right to manage the business directly. An LLP also limits the personal liability of a partner for the errors, omissions, incompetence, or negligence of the LLP's employees or other agents. The management of the day-to-day business is outlined in the LLP Agreement, providing partners with the freedom to regulate the affairs of the business. LLP registration is administered by the Ministry of Corporate Affairs (MCA) through the Office of the Registrar of Companies. The incorporation process is fully electronic, similar to the company registration process, i.e. applications and documents are filed electronically and the Registrar issues a digitally signed Certificate of Incorporation (COI).
Why register a Limited Liability Partnership?
Registering an LLP offers many benefits with the main benefit being the limited liability of partners. The members of the firm are only liable for a small amount of debt incurred by it. This is entirely different from proprietorship and partnership where the personal assets of directors and partners are not protected if the business becomes bankrupt. Registering an LLP in India offers the following benefits-
LLP is a separate legal entity from the partners. Each partner can sue the other in case a situation arises. It has an uninterrupted existence that follows perpetual succession, i.e., the partners might leave, but the business remains. A term of dissolution has to be mutually agreed on for the firm to dissolve.
Transferring the ownership of LLP is also simple. A person can quickly be inducted in as a designated partner and the ownership switches to them.
LLPs having a capital amount less than 25 lakhs and turnover below 40 lakhs per year do not require any Statutory audit unlike a Private Limited Company, where it is mandatory . It makes registering as LLP beneficial for small businesses and startups.
A Limited Liability Partnership has partners, who own and manage the business. This is different from a private limited company, whose directors may be different from shareholders. For this reason, VCs do not invest in the LLP structure.
An LLP can own or acquire property because it is recognized as a juristic person. Partners of LLP cannot claim the property as theirs.
BENEFITS OF INCORPORATING AN LLP
The advantages of LLP (Limited Liability Partnership) are:
It is easy to start and manage a business like entrepreneurs. LLP agreements are customized in according to meet the needs of partners concerned. There is fewer formalities in areas of legal compilation, annual meeting, resolution as compared to any other Private Limited Company. For a detailed comparison between LLP and Private Limited read Choosing between LLP and Private Limited.
2. No minimum capital requirement
LLP can be started with the minimum amount of capital money. Capital may be in the form of tangible, movable asset like Land, machinery or intangible form. Capital requirement in the case of a Private company( Requirements for Registration of a Private Company) and Public Company(Requirements for registration of a Public Company) is Rs. 1, 00,000 and Rs. 5,00,000 respectively whereas no such mandatory capital requirement specified under the LLP.
3. No limit on owners of business
LLP may have partners varying from 2 to many. There is no limit for partners in LLP. An LLP requires a minimum 2 partners while there is no limit on the maximum number of partners in contrast to a private company wherein there is a restriction of not having more than 200 members.
5. No requirement of compulsory Audit
LLPs are not required to audit the accounts. Any other company (Public, Private) are mandated to get their accounts audited by the auditing firm.LLP is required to audit their account in the following situation:
When the contributions of the LLP exceeds Rs. 25 Lakhs, or
When annual turnover of the LLP exceeds Rs. 40 Lakhs
6.Savings from lower compliance burden
LLP have to face less compliance burden as they have to submit only two statements i.e. the Annual Return & Statement of Accounts and Solvency. Whereas in the case of private company, at Least 8 to 10 regulatory formalities and compliances are required to be duly completed. Read Annual Cost Comparison of Private Limited and LLP.
7.Taxation Aspect on LLP
LLP is not liable to pay the tax on the income and share of its partner. Thus, no dividend distribution tax is payable as under section 40(b). Bonus, commission or remuneration, Interest to partners, any payment of salary, allowed as deduction. Provision of ‘deemed dividend’ under income tax law, is not applicable to LLP.
8.(DDT) not applicable
If the partners of LLP withdraw profits from the company, an additional tax liability in the form of DDT is not payable by partners. Whereas, in the case of a company, the owners have to pay DDT @ 15% ( surcharge & educational cess). Hence, profit of LLP is in the hands of its partners can be easily withdrawn by the partners.
Procedure For LLP Registration
Complete LLC Form
You need to fill our simple LLP online questionnaire and submit all the relevant “LLP documents”.
Obtain DSC and DPIN for
After submitting your documents we will provide you with both “DSC and DPIN”
Verification and Approval
Details provided by you will be verified & then we shall apply for LLP name approval.
Your LLP is Ready
Once Your LLP is Incorporated we will send you LLP Certificate
Steps to Register an LLP in India
1. Obtain DSC and DIN of partners
The first step is to obtain the Digital Signature Certificatete of the desired partners of the Limited Liability Partnership. The reason for this is that all the forms need to be submitted online and require the directors' digital signatures. The law also requires that all directors file for a DIN number. The application has to be made in Form DIR- 3.
2. Application For Name Approval
This process involves registering the LLP. Before you do this, you would need to see if the name is already taken. You can check on the free search facility on the MCA portal. The registrar only approves LLP names that are not taken before. The approval of the name will be made by the Registrar only if the Central Government does not deem it undesirable. The name should also not hold any resemblance to any of the existing partnership firms, LLPs, trademarks, or body corporates.
3.Filing of LLP Incorporation Documents with MCA
LLP Registration filing consists of preparation and filing of E-Form FiLLip with MCA with required documents. All the documents executed and attested as per documentation requirements has to be attached to the E-Form FiLLip and has to be digitally signed with the Digital Signature Certificate (DSC) of all the proposed Partners and Designated Partners.
4. LLP Agreement
LLP agreement is very crucial in a limited liability partnership as it determines the mutual rights and duties amongst the partners, and between the LLP and the partners. The partners enter into the LLP agreement upon the LLP registration by filing form 3 online on the MCA portal. This procedure has to be done within 30 days of the date of incorporation.
5.Apply For PAN & TAN & Bank Account
As soon as you get the Incorporation Certificate, We will apply for your LLP PAN & TAN with the NSDL. It will take around One Day.
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What makes an LLP different from a Private Limited Company?
Entrepreneurs starting a new business are always curious to know the difference between a Private Limited Company and an LLP, as both of them offer similar features. Here's the comparison between a Private Limited Company and an LLP from an entrepreneur's perspective for starting a new business.
Registration process: The processes for Private Limited Company registration and LLP Registration are very similar with some differences in the documents and the forms that are filed for incorporation.
Following are the steps involved for the incorporation of a Private Limited Company as well as an LLP:
Obtaining the Digital signature certificates (DSC)for the proposed Directors
Obtaining the Director identification number (DIN) for the proposed Directors
Obtaining the approval of the name from the MCA.
Filing for incorporation
Both LLP and Private Limited companies are registered with the Ministry of Corporate affairs under Central Government. The processing time for incorporation of both Private and public limited companies takes around 15-20 working days.
Cost of Registration: The LLPs have been designed to meet the needs of small businesses and hence, the incorporation fee for an LLP is comparatively cheaper than that of a Private Limited Company. LLP registration requires a lesser number of documents that need to be printed on Non-Judicial stamp paper as compared to the Private Limited Company Registration. Through IndiaFilings a Private Company can be registered at just Rs.6899 online here.
Features: Similar features are offered by LLP and Private Limited Company. Both being separate legal entities have assets and liabilities that are separate from that of the promoters. Even though both LLP and Private Limited companies are transferrable, a Private Limited Company offers more flexibility when it comes to transferring or even sharing ownerships. Unless closed by the promoters or by a competent authority both Private Limited Company and LLP have a perennial life.
Ownership: In LLP the partners hold the ownership as well as the powers to manage and control the LLP. Therefore, a Partner in LLP will play a very significant role as he will play the role of both owners as well as a manager. In parallel, flexibility is offered to the promoters by a Private Limited Company when it comes to ownership and ownership sharing.
Compliance: For LLP and Private Limited Company the Tax Compliances are similar. LLPs enjoy several advantages when it comes to Compliances relevant to the Ministry of Corporate affairs. An LLP doesn't need to have its account audited if the annual turnover of the LLP is less than Rs. 40 lakh and the capital contribution doesn't exceed Rs. 25 lakh. An LLP would however have to file LLP Form 8 and LLP form 11. On the contrary, a Private Limited Company would have to file an annual return with the Ministry of Corporate Affairs each year.
What Documents will you need to register an LLP?
Documents of both partners, as well as the partnership firm, have to be submitted for registering the LLP.
Documents of Partners:
ID Proof of Partners – All the partners are required to provide their PAN at the time of registering LLP. PAN card acts as a primary ID proof.
Address Proof of Partners – Partner can submit anyone document out of Voter’s ID, Passport, Driver’s license or Aadhar Card. Name and other details as per address proof and PAN card should be exactly same. If spelling of own name or father’s name or date of birth is different in address proof and PAN card, it should be corrected before submitting to RoC.
Residence Proof of Partners – Latest bank statement, telephone bill, mobile bill, electricity bill or gas bill should be submitted as a residence proof. Such bill or statement shouldn’t be more than 2 months old and must contain the name of partner as mentioned in PAN card.
Photograph – Partners should also provide their passport size photograph, preferably on white background.
Passport (in case of Foreign Nationals/ NRIs) – For becoming a partner in Indian LLP, foreign nationals and NRIs have to submit their passport compulsorily. Passport has to be notarised or apostilled by the relevant authorities in the country of such foreign nationals and NRI, else Indian Embassy situated in that country can also sign the documents.
Foreign Nationals or NRIs have to submit a proof of address also which will be a driving license, bank statement, residence card or any government issued identity proof containing the address.
If the documents are in other than the English language, a notarised or apostilled translation copy will be also be attached.
Documents of LLP:
Proof of Registered Office Address:Proof of registered office has to be submitted during registration, or within 30 days of its incorporation.
If the registered office is taken on rent, rent agreement and a no objection certificate from the landlord has to be submitted. No objection certificate will be the consent of the landlord to allow the LLP to use the place as ‘registered office’.
Besides, anyone document out of utility bills like gas, electricity, or telephone bill must be submitted. The bill should contain complete address of the premise and owner’s name and the document shouldn’t be older than 2 months.
Digital Signature Certificate:One of the designated partners needs to opt for a digital signature certificate also since all documents and applications will be digitally signed by the authorised signatory.
How can we help in Registering your LLP in India?
The LLP Registration process is completely online, so you don't even have to leave your home to get your entity registered. At Register Karo, we complete the LLP Registration online within 14 days.
Register Karo's Limited Liability Partnership Registration package includes:
DIN and DSC for two Partners
Registration fees and stamp duty
LLP PAN and TAN