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Incorporation of LLP in India

Incorporation of LLP in India

  • Published on: Feb 08, 2022

Incorporation of LLP in India

The concept of the Limited Liability Partnership (LLP) was introduced in India in 2008. An LLP has the characteristics of both the partnership firm and company. The Limited liability Partnership Act, 2008 regulates the LLP in India. Minimum two partners are required to incorporate an LLP and at least one of them should be resident in India. However, there is no upper limit on the maximum number of partners of an LLP.

Features of LLP

  • It has a separate legal entity just like companies.
  • The liability of each partner is limited to the contribution made by the partner.
  • The cost of forming an LLP is low.
  • Less compliance and regulations.
  • No requirement of minimum capital contribution.

Advantages Of LLP

  1. Separate legal entity: An LLP has a separate legal entity, just like companies. The LLP is distinct from its partners. An LLP can sue and be sued in its own name. The contracts are signed in the name of the LLP, which helps to gain the trust of various stakeholders and gives the customers and suppliers a sense of confidence in the business.
  2. Limited liability of the partners: The partners of the LLP have limited liability. The liability of the partners is limited to the contributions made by them. This means that they are liable to pay only the amount of contributions made by them and are not personally liable for any loss in the business. If an LLP becomes insolvent at the time of winding up, only the LLP assets are liable for clearing its debts. The partners have no personal liabilities, and thus they are free to operate as credible businessmen.
  3. Low registration cost: The cost of registering an LLP in India is comparatively lower than that of incorporating a public limited company or a private limited company.
  4. No requirement for minimum contribution: As an LLP can be formed with the least possible capital, there is no minimum capital requirement in the incorporation of an LLP.
  5. No requirement of compulsory audit: Whether the company is Public or Private irrespective of their share capital is expected to get its account audited. But here in the case of LLPs, there is no such mandatory requirement and this is considered to be one of the significant compliance benefits of forming an LLP. A Limited liability company is supposed to get its audit done only in two cases.
    When the contribution of LLPs exceeds over Rs. 25 lakhs.
    or
    When the annual turnover of LLPs exceeds over Rs. 40 lakhs.
  6. Taxation aspect on LLP: LLP is liable for payment of income tax and the share of the partner is not liable to taxation. Thus, no Dividend Distribution Tax (DDT) is payable.

Checklist for registering an LLP in India

  • A minimum of two partners are required.
  • The DSC is required for all designated partners.
  • DPIN for all designated Partners.
  • The name of the LLP should be such that it is not similar to the name of any existing LLP or Trademark registration.
  • Capital contribution by the Partners of the LLP.
  • LLP Agreement between the Partners.
  • Proof of registered office of the LLP.

Documents Required for LLP Registration

· ID Proof: PAN Card of all directors alongwith Voter ID/ Passport/ Driving License

· Address Proof : Latest Bank statement/ Electricity Bill/ Telephone Bill/ Mobile Bill not older than two months

· Photo : Latest Passport Size Photograph

· Registered Office Proof :Utility bill (not older than two months) and Notarized Rent agreement (in case of rented property)/ Registry Proof or House Tax Receipt (in case of owned property), No Objection Certificate (NOC) from the owner.

LLP Registration Process -

Step 1: Obtain Digital Signature Certificate (DSC)

Before initiating the process of registration, you must apply for the digital signature of the designated partners of the proposed LLP. This is because all the documents for LLP are filed online and are required to be digitally signed. So, the designated partner must obtain their digital signature certificates from government recognized certifying agencies.

Step 2: Apply for Director Identification Number (DIN)

You have to apply for the DIN of all the designated partners or those intending to be designated partner of the proposed LLP.

Step 3: Name Approval

LLP-RUN (Limited Liability Partnership-Reserve Unique Name) is filed for the reservation of the name of the proposed LLP which shall be processed by the Central Registration Centre under Non-STP. But before quoting the name in the form, it is recommended that you use the free name search facility on MCA.

Step 4: Incorporation of LLP

The form used for incorporation is FiLLiP (Form for incorporation of Limited Liability Partnership) which shall be filed with the Registrar who has jurisdiction over the state in which the registered office of the LLP is situated. The form will be an integrated form.

Step 5: File Limited Liability Partnership (LLP) Agreement

LLP agreement governs the mutual rights and duties amongst the partners and also between the LLP and its partners. Form 3 for the LLP agreement has to be filed within 30 days of the date of incorporation. The LLP Agreement has to be printed on Stamp Paper. The value of Stamp Paper is different for every state.

 

What you get-

· Incorporation Certificate

· Name Approval Letter

· LLP PAN

· LLP TAN

· DIN/DSC for 2 Directors

· LLP Agreement(Soft Copy)


 

FAQ’S

 

1. How to be a Partner in an LLP?

The designated Partner must be a natural person who is above 18 years of age. LLP Act 2018 allows a foreign national including Foreign Companies to incorporate an LLP in India, provided at least one designated partner is Indian.

2. What is a Digital Signature Certificate?

A DSC is helpful in identifying the sender or the signee electronically. The Ministry of Corporate Affairs (MCA) has made it mandatory for all the designated partners to apply with the Digital Signatures.

3. Is LLP registration mandatory?

Yes, an registration of an LLP on the Ministry of Corporate (MCA) portal is mandatory. An LLP must obtain registration under the Limited Liability Partnership (LLP) Act to be a legally valid entity.

4. Does LLP require MoA and AoA?

No, the Memorandum of Association (MOA) and the Articles of Association (AOA) are important documents of a company registered under the Companies Act, 2013. The LLP agreement governs the LLP and not the MOA and AOA. Thus, an LLP does not have to draft the MOA and AOA. It has to draft the LLP agreement.

5. Can NRIs/ Foreign Nationals be designated partners in LLP?

An NRI can be a designated partner in a Limited Liability Partnership if he has a Designated Partner Identification Number. However, at least one Designated Partner in the LLP must be a resident Indian.

6. What are the compliances for LLP?

An LLP is supposed to file

     1. LLP Annual return by Filing Form 11.

     2. Final Statement of Account and Solvency

     3. Income Tax Return.

 

7. Should directors be appointed to an LLP?

No, there are no directors in an LLP. An LLP does not have to appoint directors or have a board of directors. The partners govern the business of an LLP. The partners take decisions regarding the working and business of the LLP. Thus, an LLP needs to have a minimum of two partners at all times.

8. What is DPIN?

Designated Partner Identification Number (DPIN) is a unique number given by the MCA to the designated partner of an LLP. The DPIN is similar to the Director Identification Number (DIN) of a company director. DPIN can be obtained for any person when registering an LLP, or a person can later apply for a DPIN to become a designated partner of an existing LLP.

9. Which is better LLP or Private Limited Company?

It is always better to incorporate an LLP over a Private Limited Company as though both offer the same features. The cost to incorporate an LLP is less as compared to the Private Limited Company. Similarly, the LLP owner holds the ownership as well as control over the Company. The Compliances in the LLP are fewer as compared to a Private Limited Company.

10. Is it possible for an LLP to raise funds?

An LLP cannot raise funds from the public in any form. In an LLP only partners can contribute their capital and the liability of the Partners is limited to the extent of their contribution.

11. How long does it take to incorporate an LLP?

The time taken for incorporation depends on the submission of relevant documents by the client as well as the Approvals from the Government authorities. Nucleus Advisors can help you Incorporate an LLP in 14-20 working days.

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