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.
Notable Benefits of LLP
The following section manifests the benefits of an LLP-based entity:
Separate legal entity
An LLP rejoices the independent legal status, just like companies. The LLP holds different status from its partners. Such entities have the right to sue the third party in case of legal dispute and vice versa. The
The contracts are signed in the LLP's name, which aids to foster the trust of various stakeholders and renders the end-users and vendors a sense of confidence in the business.
Limited liability of the partners
The partners of such entities have limited liability. The partners' liability is limited to the agreed contribution to the company. This indicates that they are accountable to pay only the quantum of contributions made by them and are not personally obligated to address any loss in the business. If an LLP ends up insolvent during winding up, only the LLP assets are liable for compensating its debts. The partners possess no personal liabilities, and therefore they can operate as credible businessmen.
Low cost as well as minimal compliance
The cost of incorporating an LLP is quite low compared to other business structures such as private and public limited companies. Also, the quantum of compliances is on the lower side for these entities. The LLP is mandated to file only two statements yearly basis, i.e. Statement of Accounts and Solvency and an Account return.
No scope of minimum capital contribution
The LLP can be incorporated in the absence of any minimum capital. Also, there is no requirement of procuring any amount of capital contributed by the concerned partners.
What type of Documents are Required to Register an LLP in India?
Here are the listicles of mandatory documentation that are required during the registration of LLP in India;
PAN Card/ Identification proof of proposed partners: All proposed partners are mandated to furnish their PAN during registration time. PAN card serves as a fundamental ID proof.
Partners' address proof: Proposed partner furnish any one document out of passport, Voted ID, DL, or Aadhar Card. Name as well as other information as per address proof & PAN card ought to be exactly the same.
Any flaws in the details of the PAN can be corrected before furnishing to RoC.
Partners' Residence Proof –Updated bank statement, utility bill, should be furnished as residence proof. Such bills should be the latest one, i.e. not older than 2-3 months & must entail the partner's name as cited in PAN card.
Photograph – Partners must furnish the latest passport size photo, preferably on white background.
Passport (in case of Overseas Nationals/ NRIs) – To become a partner of Indian-based LLP, overseas nationals & NRIs have to furnish their passport mandatorily. Passport must be notarized by the concerned authorities in the nation of such foreign nationals and NRI, else Indian Embassy located in the nation can also sign the documents.
Foreign nationals or NRIs must facilitate address proof, bank statement, and legit identity proof enclosing the address.
If the documents exist in any other language, the applicant must facilitate the notarized translation copy.
Registered Office Address Proof: Registered office proof must be furnished during the registration process or within 30 days of incorporation.
If the registered office is rented, a rent agreement and a NOC from the actual land owner have to be furnished. NOC shall be the landlord's consent to permit the LLP to use the premises as a registered office'.
Also, anyone document out of gas, electricity, or telephone bill should be submitted. The bill should not be older than two months and must reflect the address of the premise and the owner's name.
Digital Signature Certificate (DSC): One of the designated partners must hold DSC for signing the documents electronically.
Checklist for LLP Registration
- Minimum of two designated partners DSC of all the partners
- DPIN of all serving partners
- Name of the entity, which is not identical to any prevailing company or trademark
- The capital contribution made by the serving partners of the LLP
- LLP Agreement
- Proof of registered office of the LLP
Step-by-Step Procedure for Registering LLP in India
To incorporate an Indian LLP, you must first secure the Designated Partner Identification Number (DPIN). This can be done by filing an e-from for securing DPIN or DIN. You would then require obtaining DSC, i.e. Digital Signature Certificate, and register it on the MCA's portal.
After that, you need to get name approval for the firm from the ministry. Once the name is acquired, you can incorporate the LLP by filing the prescribed application form.
Step 1: Application for DIN or DPIN
All serving partners of the proposed firm shall secure DPIN. For this, you need to file an online application viz, DIR-3 to secure DPIN. For those who already have DIN, the same can be used as a DPIN.
Step 2: Secure & Register DSC
The Information Technology Act, 2000 emphasized the use of Digital Signatures on the dossiers furnished electronically to ensure the document's safety. Prevailing legalities mandate the proposed LLP to use the digital signature for signing the documents.
Acquire DSC – The licensed Certifying Authority, i.e. CA, grants the digital signature. CA indicates a person who has been vested with the authority to grant DSC u/s 24 of the Indian IT-Act 2000.
Register DSC - Role check* can be performed after registering the DSC with the LLP application.
'Role Check' functionality ensures that the MCA21 system shall validate whether the digital signatures affixed on the prescribed form belong to the company's signatory and/or of a practising professional (if applicable)
Step 3: Create a login on the authority's portal
Visit the concerned authority portal and register as a user in the relevant user category. This is necessary for getting access to e-form.
Step 4: Incorporate an LLP
Use Form 1 for registering the proposed LLP name. After name approval, proceed to address incorporation formalities such as facilitation of Incorporation document and Subscriber's statement.
After form approval, you will come across an email relating to the same. It also shows the status " "Approved" to confirm the applicant.
Step 5: Draft LLP Agreement
After the incorporation process, an initial LLP agreement has to be filed within the duration of 30 days of the incorporation date. The user must file the detail in Form 3 (information about LLP agreement and change, if any, made therein.
The user has to file the information in Form 3 ( Information with regard to Limited Liability Partnership Agreement and changes, if any, made therein).
Avail Arvisa Services to Address Registration Formalities with ease
It is evident that LLP registration seeks a watchful approach as it is subjected to number of legal requirements. Even the slightest glitch in the application or paperwork is enough to trigger the chances of application rejection. This is where you need a professional back. At Arvisa, we make sure the client seeking LLP registration remains on point as well as flawless throughout the registration process. Our expertise would let you avail of registration without any hassle.
How we proceed as soon as the client drops a request on our platform?
- In-depth examination of client's business and nature of the operation
- Identification of applicable compliances for registration
- Initiating paperwork process and arranging pre-registration deliverable
- Confronting concerned authority for addressing registration formalities and document submission
- Sorting out relevant post-incorporation compliances
Frequently Asked Questions
Name reservation: The first step to incorporate a Limited liability partnership (LLP) is the reservation of the name of LLP. The applicant has to file eForm 1 for ascertaining availability and reservation of the name of an LLP business.
The Certificate of Incorporation (COI) acts as conclusive evidence of the formation of the LLP. Immediately after securing this certificate, partners can initiate the business proceeding with ease.
The due date for filling this form is 30th October of each FY. Failure to file such a form can attract a penalty of Rs 100/day.
The processing time for incorporating LLP in India takes around 15-20 working days.
As per the central government notification, LLP registered under the LLP Act, 2008 must be treated as a partnership firm or firm under the GST regime.
LLP is not obligated to address taxes on their income & partner's share. Therefore, no dividend distribution tax is addressable as u/s 40(b). However, bonuses, commissions or remuneration, salary payment, Interest to partners do expose to taxes.
A member of such establishments is taxed on his/her profit's share that is reaped by the partnership. For a higher tax rate, the taxpayer, A member of an LLP is, however, taxed on his or her share of the profits that are generated by the partnership. For a higher or additional rate taxpayer, they would therefore pay 40% or 45% income tax on the LLP profits, whereas a company may pay corporation tax at a lower rate (19%).
LLPs in India is mandated to audit their account as per Rule 24 of LLP, Rules 2009. Such rules, among other, states that any LLP, whose annual turnover does not surpass, in any FY, Rs 40 Lacs, or whose contribution does not surpass Rs 25 lac, is not obligated to get its accounts audited