What is a Limited Liability Partnership?
Limited Liability Partnership (LLP), a type of partnership that is open to any type of business enterprise, allows all members to have limited liability. This means that each partner is not responsible for any losses, negligence or misconduct of the other partners. This is called a Limited Liability Partnership. Partners have the right to manage the business, unlike shareholders. These characteristics make LLPs resemble both partnerships and corporations.
Register as a New LLP
Registering for an LLP can be a simple process. It can be summarized in the following steps:
Step 1: Obtaining a Digital Signature Certificate (DSC).
To register a LLP, the first step is to obtain the digital signatures from all designated partners. Because documents for the LLP are filed online, a digital signature is necessary. These documents are digitally signed, which further aids in obtaining a certificate.
You can obtain digital signatures from authorized government agencies such as the National Informatics Center and IDRBT Certifying Authority. Costs for acquiring a DSC vary depending on the application to which certifying agency the applicant applied.
Step 2: Reserving your Name
The applicant must obtain a Limited Liability Partnership Reserve Unique Name (LLPRUN) in order to register a proposed LLP. This can be done at the Central Registration Centre. It is best to get a name from the Ministry of Corporate Affairs portal before you quote or cite the name. This will give you a list of companies that have similar or identical names to your proposed LLP. After the name is chosen, the registrar will approve any name that is not identical to an existing LLP. To get the approval of registrar, the LLP-RUN must be submitted together with a payment.
Step 3: Incorporation
For incorporation of LLP, a form for Limited Liability Partnership incorporation (FiLLiP), must be completed and submitted to the registrar. As per Annexure A, fees must be paid. Only 2 people may apply for allotment.
Step 4: File a Limited Liability Partnership Agreement
This agreement regulates the rights and obligations of the partners. You can file the agreement online in Form 3 on MCA Portal. Within 30 days of the date of incorporation, the Form 3 for LLP agreements must be filed. The LLP Agreement must be printed on Stamp Paper. Each state has its own stamp paper.
DSC and Form 3 take approximately 15 days, depending on the availability of all documents.
Documents required for LLP registration
You will need the same documents to register your LLP as you would for any business setup. Two sets of documents are required for LLP registration. documents for partners and the LLP documents.
Documents for Partners
All partners of the LLP must submit the following:
- All partners must have identity proofs and PAN cards.
- Address Proofs of Partners that include Voter ID or passport.
- A passport-sized photograph on a background of white.
- Passports for NRIs or foreign nationals who want to be partners in an LLP.
Documents of LLP
Documents pertaining to the LLP entity must be submitted compulsorily
- At the time of registration, or within 30 days after incorporation of an LLP, a proof of the registered address must be provided. If the registered office is located in a rented property, an NOC from the landlord is required. You will also need to provide proof of residency, such as utility bills no older than two months.
- A Digital Signature Certificate (DSC).
How much does it cost to register an LLP?
Below is the information about the cost of registration
DSC – Rs. For 2 partners, 1500-2500
Name Reservation – Rs. 200
Incorporation – Depends on capital contribution
Contribution up to Rs. Contribution up to Rs. 500 & Contribution Between Rs. 1-5 lakh – Rs. 2000
LLP Agreement – Depends on capital contributions
Contribution upto Rs 1 lakh – Rs50 for filing Form 3; stamp duty based upon the state in which the LLP was formed
Limited Liability Partnerships in India
Limited Liability Partnerships are in India based on the Limited Liability Partnership Act of 2008 The Limited Liabilities Partnership Act 2008, which was published in the official Gazette of India on the 9th of Jan 2009, became effective as of 31 March 2009. These rules were published later on the 1st April 2009, and they were amended in 2017. Official incorporation of the LLP took place on April 2, 2009. A LLP is attractive to many entrepreneurs because it is relatively inexpensive. There is no minimum capital requirement and very few compliance regulations, compared with other types of business enterprises. You can get a variety of business loans to help you start a business, expand your business, or join an LLP.
Benefits of registering as an LLP
- Limited Liability: The liability of partners is limited to their contribution
- Transferring a LLP to another person is easy
- Audits of turnover less than Rs. 40 lakh, Rs. 40 lakh and Rs.
- LLP has the right to own or transfer property. This can be done under their own name.
- Even after the death of any partner, LLP’s existence can still be considered
- LLP is a legal entity that is separate from the partnership. Both partners and juristic persons who are not related to it can sue one another or be sued
- An LLP does not have to pay dividend tax
Eligibility Criteria for LLP Registration
- An LLP requires that you be at least 18 years old to open it. However, anyone below 18 can still become a member.
- To start an LLP, you must have at least two people.
- There is no maximum number of partners
- Except for stamp duty, there is no minimum capital requirement to open an LLP.
- Indian residents should have one person.
- An LLP should have unique name requirements
- Names should not be identical to existing companies
Why would business owners choose LLP over Partnership Registration
- LLP is a distinct legal entity, whereas Partnership firms are not liable to partners beyond the amount of their contribution. Partnerships are not exempt from liability.
- Two designated partners are required for forming an LLP. The maximum number of partners in a partnership is 50
- LLP registration must be done through the Ministry of Corporate Affairs. Partnership firms can register under the Registrar of Firms.
- Names for LLPs should be unique. They should not duplicate any other names. However, there are no restrictions on using names in Partnership
- An LLP has a higher credibility than a Partnership firm.