Limited Liability Partnership Registration
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What is a Limited Liability Partnership?
A limited liability partnership is a type of partnership model of business wherein some or all the partners of the business have limited liability on them. The minimum requirement of the number of partners in a LLP is restricted to there is no defined limit for the maximum number of partners.
In LLP business, one partner is not liable for the misconduct or negligence of the other partner. Each and every partner is liable only to the extent of agreed contribution in the agreement. A Limited Liability Partnership entity is different from the partnership entity, as in this entity the business assets and personal assets of the partners are different. Even in case of losses, the partners are only liable to the extent of his share capital in the entity.
LLP is a mixture of a limited company and partnership as it gives combined benefits of both. An LLP can continue with its operations even when there are changes in the partners. It is even eligible for holding property in its name and entering into various contracts.
To Whom and When is it Suitable?
Limited Liability Partnerships are the best driver for the start-ups because of the suitable features it has. It is an easier option to start with and its statutory process has very few formalities. The entrepreneurs can commence their business very quickly with any amount of minimum capital.
Limited Liability Partnerships is suitable for related and non-related entrepreneurs who are not willing for external investors to invest in there in the near future and want to maintain a formal business relation amongst them. It is not the point here tat the business cannot be converted into a private limited company in the future, as and when the business is planning to attract external investment, they can go for registering themselves as a private limited company.
Characteristics of Limited Liability Partnership:
The cost of commencing the business as LLP is very low and is very cheaper in comparison to a commencing a private limited company. It only includes a statutory government fee of Rs 5000. Apart from this cost, there is very low additional compliance cost required, no paid-up capital. This makes it very easier for entrepreneurs to start up their business in a very period of time.
For Non-Scalable Businesses
If the business doesn’t want to upscale its operations or do not want to attract external investment, then LLP is the most suitable option for them as in this type of model, combined features of a private limited company and general partnership can be enjoyed without incurring additional or commencement costs.
MCA has given very minimal statutory compliances for LLPs. Some of them are:
- An audit has to be conducted if the turnover of the business is greater than Rs40 lakhs, or
- Paid-up capital is higher than Rs. 25 lakhs.
In a private limited company, all the structural changes are to be reported tor RoC, this requirement is minimum for LLPs
LLP +offers tax benefits if the business’s turnover exceeds Rs. 1 Crore in profits and apart from that tax surcharge which is applied on companies having profits above Rs 1 crore is not applicable to LLPs and DDT is also not levied on them. Loans to partners is also not taxable as income
Number of Partners
Regulations state that the minimum number of partners required to start with LLP business form is 2 but there is no upper limit of the same.
Documents Required for Limited Liability Partnerships Registration
Documents required of partners:
- ID proof or PAN Card of partners.
- Partners’ address proof like Voter’s ID, Passport, Driver’s license or Aadhar card. For foreign national’s address proof like; a driving license, bank statement, residence card or any government-issued identification.
- The latest bank statement, phone bill, mobile bill or a gas bill requires to be submitted as a residence proof by Partners.
- Partners’ white background passport size photo.
- Passport is required for all Foreign Nationals & NRI’s.
Documents required of LLP:
- Proof of registered office address: the proof needs to be submitted during the registration or within 30 days of its incorporation. For the registered office is taken on rent, a rental agreement or No Objection Certificate from the landlord needs to be submitted.
- Digital Signature Certificate: A DSC is vital as all the documents and applications shall be digitally signed by the authorized signatory.
Procedure to Form a Limited Liability Partnership (LLP)
Obtaining Digital Signature Certificate (DSC) for the Partners
A Digital Signature Certificate (DSC) is required for getting Director Identification Number or Designated Partner Identification Number for the Partners of the LLP. Hence, a DSC of the proposed partner has to be obtained and it’s the first step towards incorporating the business as an LLP entity.
Obtaining Partner’s Director Identification Number:
Once the partners’ DSCs are obtained, Director Identification Number (DIN) can be applied for. Normally, DIN registration takes place in a short period of time, but sometimes additional documents are required to be submitted to the DIN Cell for getting an approval of the application submitted for DIN. DIN and DPIN are synonyms of each other and can be used in place of one another. Each partner of the business is required to have only one DIN.
Obtaining Name Approval:
After the partners have two DPINs, application for LLP’s name reservation can be made towards MCA. The applicant mut ensure that the naming guidelines are rigidly followed as this will enable a speedier approval of the application and the name. The application made for the name registration submitted to MCA will be under When the application relating to the reservation of name was submitted towards the MCA, will be undertaken via the Roc which is located in the state of incorporation.
Filing for Incorporation:
Partners will be issued a name approval letter once the given name in the application has been approved by MCA and within a time period of 60 days the partners have to submit the documents regarding registration and incorporation of their LLP. If the partners of the LLP fail to form the entity, within 60 days period since the name approval has been given to them, they have to apply and get the name approval again.
For filing up for registration, documents showing possession of the registered office is also required. Once the documents are prepared, then the documents related to registered office with the subscriber’s signed sheet should be submitted to the MCA for getting the LLP registered in India. Once the application for registration of LLP has been accepted, the Registrar will issue a certificate of incorporation. After the receipt of this certificate, the LLP is considered as registered and then PAN of LLP can be applied for.
Then at the last, the partners have a time od 30 days for submitting their partnership agreement of the LLP to MCA and if they fail to do so, they are liable to pay a statutory penalty.
Therefore, an LLP is a very easier and quicker option for any start-up to commence their business with. If the requirements of the business changes in the future, they can quit LLP form of entity and switch onto another form with the consent of all the partners of the business.