Comprehensive guide on Limited Liability Partnership (LLP) Registration / Incorporation in India

A Limited Liability Partnership (LLP) is a popular business structure in India, offering a blend of the flexibility of a partnership with the limited liability of a company. This guide provides a detailed overview of LLP registration, covering prerequisites, the registration process, compliance requirements, advantages, disadvantages, and frequently asked questions.

1.     What is an LLP?

An LLP is a legal business structure that combines the benefits of a partnership and a company. Partners in an LLP have limited liability, meaning their personal assets are protected from business debts, similar to shareholders in a company. However, LLPs retain the flexibility and simpler regulatory requirements of a traditional partnership. LLPs are governed by the Limited Liability Partnership Act of 2008.

2.     LLP Registration Prerequisites and Eligibility Conditions

To register an LLP in India, you must meet the following criteria:

• Minimum Two Partners: An LLP requires a minimum of two partners, with no maximum limit.
• Designated Partners: At least two designated partners are mandatory, and they must be natural persons. At least one designated partner must be an Indian resident.
• Body Corporate Partner Nomination: If a body corporate is a partner, it must designate a natural person as its representative.
• Agreed Contribution: Each partner must contribute to the LLP’s capital as agreed upon.
• Minimum Authorized Capital: While there’s no minimum capital requirement to start an LLP, the registration fee varies based on the capital contribution declared.
• Indian Resident Designated Partner: At least one designated partner must be an Indian resident.

3.     Characteristics of a Limited Liability Partnership (LLP)

• Separate Legal Entity: An LLP is a separate legal entity, distinct from its partners. It can own assets, enter into contracts, and sue or be sued in its own name.
• Perpetual Succession: An LLP continues to exist even if partners change (through admission, resignation, or death).
• Limited Liability: Partners’ liability is limited to their agreed contribution to the LLP. Their personal assets are generally protected from business debts.
• Flexible Management: LLPs offer flexibility in managing the business, as the LLP agreement can be tailored to the specific needs of the partners.
• Less Compliance Burden: Compared to companies, LLPs have fewer compliance requirements.

4.     Advantages of an LLP

• Limited Liability Protection: Protects partners’ personal assets.
• Separate Legal Entity: Enhances credibility and allows the LLP to enter contracts and own property in its name.
• Perpetual Succession: Ensures business continuity.
• Flexibility in Management: Allows for customized management structures.
• Lower Compliance Burden: Reduces administrative overhead.
• Easy Formation: The registration process is relatively straightforward.

5.     Disadvantages of an LLP

• Potential Penalties for Non-Compliance: While compliance is less burdensome than for companies, penalties for non-compliance can be significant.
• Dissolution Issues: LLPs can face dissolution if the number of partners falls below two and remains so for more than six months.
• Difficulty in Raising Large Capital: LLPs may find it more challenging to raise large amounts of capital compared to companies, as they cannot issue shares to the public.

6.     Limited Liability Partnership (LLP) Name Structure

• Uniqueness: Choose a unique name that is not already in use.
• Descriptive: Include words that accurately describe the LLP’s business activities.
• Suffix: End the name with “LLP” or “Limited Liability Partnership.”

7.     Documents Required for LLP Registration

• PAN Card/ID Proof of Partners: Aadhaar Card, Voter ID, Driving License, Passport.
• Address Proof of Partners: Recent bank statement, utility bill (electricity, telephone, gas).
• Passport-size Photographs of Partners: White background.
• Proof of Registered Office Address: Rental agreement (if applicable), No Objection Certificate (NOC) from the landlord, recent utility bill.
• Digital Signature Certificate (DSC): For at least one designated partner.
• For Foreign Nationals and NRIs: Passport, proof of overseas address.

8.     Procedure for LLP Registration

1. Obtain DSC: All designated partners need a DSC.
2. Obtain DIN: Partners who don’t have a Director Identification Number (DIN) must apply for one.
3. Choose an LLP Name: Select a unique and available name.
4. File LLP Incorporation Form (FiLLiP): This form contains details about the LLP, partners, and registered office.
5. Draft LLP Agreement: Create a comprehensive agreement outlining the rights, duties, and responsibilities of the partners. This must be filed within 30 days of incorporation.
6. Obtain Certificate of Incorporation: The Registrar of Companies (RoC) issues this certificate after verifying the documents.
7. Apply for PAN and TAN: Apply for a Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) for the LLP.

9.     LLP Annual Return and Compliance

LLPs must file annual returns with the Ministry of Corporate Affairs (MCA). This includes:

• Form 11: Statement of Accounts and Solvency.
• Form 8: Annual Financial Statement.

Other compliances include filing income tax returns, tax audit reports (if applicable), and complying with GST regulations if the LLP is registered under GST.

10.                        LLP Registration Fees, Cost & Charges

LLP registration costs vary based on the capital contribution and the state of incorporation. Costs typically include DSC fees, DIN fees, name approval fees, registration fees (which vary with capital contribution), and professional fees.

11.                        Minimum Requirements for LLP Registration

• Minimum 2 Partners
• DIN for all Designated Partners
• Nominee (if a body corporate is a partner)
• DSC for all Designated Partners
• Capital Contribution (no minimum amount, but registration fees vary with contribution)
• Registered Office Address

12.                        Benefits of LLP

• Limited Liability: Protects personal assets.
• Easy to Manage: Fewer compliance requirements than companies.
• Enhanced Credibility: Seen as a more formal business structure than sole proprietorships or traditional partnerships.
• Business Continuity: Perpetual succession ensures the business continues even if partners change.

For Limited Liability Partnership (LLP) registration / incorporation and related compliance requirements, reach out to us on email: info@returnfilings.com or on whatsapp: https://wa.me/919910123091

13.                        Additional Resources

For further reading, explore:

·       LLP Annual Filing Compliance: Easy Online Filing for Your Limited Liability Partnership

·       LLP Partner Addition/Removal: Streamlined Process for Changes in Your Limited Liability Partnership

·       LLP Agreement Changes: Expert Drafting & Modification Services for Your LLP Agreement

·       LLP Name Change: Simple Online Process to Change Your Limited Liability Partnership Name

Frequently Asked Questions (FAQs) related to Limited Liability Partnership (LLP) Registration

Q-1: Who is eligible for an LLP?

Answer: Any individual or body corporate can be a partner in an LLP, subject to certain conditions (e.g., designated partners must be individuals and at least one must be an Indian resident).

Q-2: How much does an LLP cost?

Answer: The cost varies depending on the capital contribution and professional fees.

Q-3: Is GST required for an LLP?

Answer: GST registration is required if the LLP’s turnover exceeds the threshold limit.

Q-4: How to register an LLP?

Answer: Follow the steps outlined in the “Procedure for LLP Registration” section.

Q-5: What is a DPIN (Designated Partner Identification Number)?

Answer: DPIN is now merged with DIN (Director Identification Number). It’s a unique identification number for designated partners.

Q-6: How long does it take to incorporate an LLP?

Answer: The registration process typically takes a few weeks, depending on the MCA processing time.

Q-7: Can NRIs/Foreign Nationals be designated partners in an LLP?

Answer: Yes, but at least one designated partner must be an Indian resident.

Q-8: Do LLPs allow Foreign Direct Investment (FDI)?

Answer: Yes, LLPs can receive FDI, subject to certain regulations.

Q-9: Can we convert a Partnership Firm into an LLP?

Answer: Yes, there is a process for converting a partnership firm into an LLP.

Q-10: What documents are required for incorporating an LLP?

Answer: See the “Documents Required for LLP Registration” section.

Q-11: Is LLP a good idea?

Answer: It depends on the nature of the business and the preferences of the partners. LLPs offer a good balance of flexibility and limited liability.

Q-12: What are the compliances for an LLP?

Answer: See the “LLP Annual Return and Compliance” section.

Q-13: Is it possible for an LLP to raise funds?

Answer: While raising large sums of capital can be more challenging than for companies, LLPs can still raise funds through various means, such as loans and partner contributions.

Q-14: What is LLP registration?

Answer: It’s the process of legally forming an LLP by registering it with the MCA.

Q-15: Which is better, LLP or Private Limited Company?

Answer: The best choice depends on the specific needs and goals of the business. Companies are better suited for raising significant capital and may be preferred by some investors. LLPs are often preferred by smaller businesses and professional firms due to their flexibility and lower compliance burden.

Q-16: How to start an LLP?

Answer: Follow the steps outlined in the “Procedure for LLP Registration” section.

Q-17: How many people are required to incorporate an LLP?

Answer: A minimum of two partners is required.

Q-18: What are the benefits of an LLP?

Answer: See the “Advantages of an LLP” section.

Q-19: How to be a Partner in an LLP?

Answer: You become a partner by entering into an agreement with the existing partners and contributing to the LLP’s capital. The LLP agreement will define the terms of the partnership.

Q-20: How much capital is required to start a Limited Liability Partnership?

Answer: There’s no minimum capital requirement to start an LLP, but the registration fee is based on the declared capital contribution.

Q-21: What is the main purpose of a limited partnership?

Answer: While the question asks about “limited partnership,” this guide focuses on LLPs (Limited Liability Partnerships). A traditional limited partnership is a different structure with general partners and limited partners. The main purpose of an LLP is to provide limited liability to its partners while offering flexibility in management.

Q-22: Who pays the debts of an LLP?

Answer: The LLP itself is liable for its debts. Partners’ liability is limited to their agreed contribution.

Q-23: What are the limitations of an LLP?

Answer: See the “Disadvantages of an LLP” section.

Q-24: How do I register a partnership firm in India?

Answer: While this question refers to a general partnership, the process is similar in some aspects to LLP registration (though LLPs offer limited liability). You’ll need to create a partnership deed, obtain PAN, and register with the relevant authorities. However, this guide primarily focuses on LLPs, which are distinct from traditional partnerships.

Q-25: What is the cost of registering a partnership firm in India?

Answer: The cost varies depending on the state and professional fees. For LLPs, the registration fee is tied to the capital contribution.

Q-26: What are the documents required for partnership registration?

Answer: For general partnerships, the documents typically include the partnership deed, PAN cards of partners, address proof, and identity proof. For LLPs, see the “Documents Required for LLP Registration” section.

Q-27: How do I create a partnership deed?

Answer: A partnership deed should be drafted by a legal professional and clearly outline the terms of the partnership, including profit sharing, responsibilities, and dispute resolution mechanisms. The same is true for the LLP Agreement. Contact us for drafting partnership deed.

Q-28: What is the difference between a registered and unregistered partnership? A registered partnership (including an LLP) has greater legal standing and can sue or be sued in its own name. Unregistered partnerships have limitations in this regard. LLPs must be registered to exist legally.

Q-29: How do I dissolve a partnership firm in India?

Answer: The process for dissolving a partnership is outlined in the partnership deed or LLP agreement. It typically involves mutual agreement among the partners and notification to the relevant authorities.

Q-30: What are the advantages of registering a partnership firm?

Answer: For LLPs, the key advantages include limited liability, separate legal entity status, and perpetual succession. For general partnerships, registration offers better legal standing.

Q-31: How do I change the name of a partnership firm?

Answer: Changing the name of a registered partnership (including an LLP) requires following a formal process with the relevant authorities, including filing an application and paying the required fees.