Limited Liability partnership Incorporation
Limited Liability Partnership Incorporation is ideal for firms with multiple partners and looking for less compliance burden. Though not a Company but it gives an advantage of limiting the liability of the partners to the defined contribution.
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Limited Liability Partnership (LLP) Registration in India
What is Limited Liability Partnership (LLP)?
A Limited Liability Partnership (LLP) is a legal business structure that combines features of both a partnership and a corporation. It provides its owners (called partners) with limited liability protection, meaning that their personal assets are protected from the debts and liabilities of the LLP.
Features of LLP
Unlimited Number of Partners: Unlike some other business structures, LLPs can have an unlimited number of partners. However, the laws and regulations governing LLPs vary between countries, so it’s important to consult the specific rules in your jurisdiction.
Flexibility in Management: LLPs allow for flexibility in terms of management and decision-making. The partners can determine the management structure and allocate roles and responsibilities according to their agreement.
Professional Practice: LLPs are commonly used by professionals such as lawyers, accountants, architects, and consultants. It provides them with a business structure that combines the advantages of a partnership (flexibility, shared decision-making, etc.) with the benefit of limited liability protection.
Advantages of LLP
Separate legal entity: An LLP is a separate legal entity from its partners. It can enter into contracts, own assets, and sue or be sued in its own name.
Limited liability of the partners: The partners in an LLP are not personally liable for the debts and obligations of the business. Their liability is limited to the amount they have invested in the LLP, and their personal assets are generally protected.
Low cost and less compliance: The cost of compliances and the number of compliances are very few in an LLP as compared to the Company.
No requirement of minimum capital contribution: As per the Limited Liability Partnership Act, 2008, there is no minimum capital contribution prescribed for the incorporation of an LLP which gives the partners a flexibility to contribute as per their requirements.
Disadvantages Of LLP
Penalty on non-compliance: LLPs are subject to various regulatory and compliance obligations, which can vary by jurisdiction. These obligations may include maintaining proper accounting records, filing annual reports, adhering to specific licensing or professional regulations, and complying with tax requirements. Failure to fulfill these obligations can result in penalties or legal consequences.
Limited Transferability of Ownership: LLPs often have restrictions on the transfer of partnership interests. The admission of new partners or the withdrawal of existing partners may require the consent of all partners or be subject to certain conditions specified in the partnership agreement. This limited transferability can restrict the ability to bring in new partners or exit the partnership.
Difficulty to raise capital: In certain industries or regions, LLPs may be perceived as less credible or prestigious compared to other business structures such as corporations. Some clients, investors, or lenders may have a preference for dealing with corporate entities, which could potentially affect business opportunities or access to funding.
LLP Registration Process
The LLP registration process typically involves several steps and is done through is done through the V-3 Portal of Ministry of Corporate Affairs (MCA).
Step 1: Obtain Digital Signature Certificate (DSC): Partners must obtain digital signature certificates, which are required for digitally signing the registration documents. DSCs are usually issued by Certifying Authorities. Once the DSC’s are procured, it should be registered with the Ministry of Corporate Affairs V-3 portal (MCA V3 portal).
Step 2: Name Approval: Choose two desired LLP names and initiate the name reservation process by submitting them in RUN-LLP (Reserve Unique Name) through the Ministry of Corporate Affairs (MCA) portal. This can be done conveniently online after creating login credentials with the MCA portal. Ensure that the selected names are not already registered and comply with trademark regulations and legal restrictions.
Upon successful verification of the proposed names and their availability, the MCA will grant approval, and you will receive a Name Approval Letter or Certificate. This official document confirms the reservation of your preferred LLP name for a specified period, typically ranging from 20 to 60 days, depending on the applicable jurisdiction.
Step 3: Incorporation of LLP: Once the name is approved, you can proceed with the incorporation of LLP by filing Form – FILLIP and INC-9. Fill in all the details pertaining to the LLP address, partners, contribution, designated partners etc. and pay the registration fees. The fees may vary depending on the LLP’s capital contribution or jurisdiction-specific regulations.
Step 4: Certificate of Incorporation: The regulatory authority will review the submitted documents and verify the information provided. After approval, the regulatory authority will issue a Certificate of Incorporation confirming the formation and registration of the LLP. This certificate serves as legal proof of the LLP’s existence.
Step 5: File Limited Liability Partnership (LLP) Agreement: Once the Limited Liability Partnership (LLP) is incorporated, file the Limited Liability Partnership (LLP) Agreement within 30 days of incorporation in Form -3.
Documents Required for LLP Registration:
- Identity Proof – Passport/ Voter ID card/ Aadhaar card/Driving license
- Residential Proof – Bank Statement/Electricity Bill/Telephone bill/Mobile bill/Utility Bill/Registered/Notarized Rent Agreement
- PAN Card (Permanent Account Number)
- Consent and Declarations to act as Partner/Designated partner
- Subscriber’s sheet signed by all partners and Chartered Accountant in practice.
Proof of Registered Office Address:
- Recent utility bill (electricity bill, telephone bill, etc.)
- Rent agreement or lease agreement
- No-objection certificate from the property owner (if the property is not owned by the LLP)
Form 11 (Annual Return): LLPs are required to file an Annual Return (Form 11) within 60 days of the closure of the financial year.
Form 8 (Statement of Accounts and Solvency): LLPs need to file a Statement of Accounts and Solvency (Form 8) within 30 days from the end of six months of the financial year. This statement includes details of assets, liabilities, income, and expenditure of the LLP.
Income Tax Return (ITR-5): LLPs are required to file income tax returns (Form ITR-5) annually, disclosing their income, deductions, and tax liabilities.
Designated Partners KYC: The KYC for designated partners need to be filed before 30th September of every year.
Cost Involved for LLP Registration The cost involved in LLP registration can vary depending on several factors, including the jurisdiction, professional fees, and other related expenses.
Time Involved for LLP Registration LLP incorporation approximately takes around 10-12 working days, provided that all the necessary documents and information submitted is accurate.
Frequently Asked Questions
Limited Liability Partnership (LLP) registration refers to the process of legally incorporating an LLP under the provisions of the Limited Liability Partnership Act, 2008 in India. The LLP registration process involves several steps:
- Obtaining Digital Signature Certificate (DSC);
- Name Reservation by filing RUN – LLP (Reserve Unique Name);
- Filing of Incorporation in form Fillip along with necessary attachments such as Identity and address proofs of partners, subscriber’s sheet, consent and declarations etc;
- Receiving of Certificate of Incorporation; and
- Filing of Initial LLP Agreement in Form-3
Registering an LLP requires certification from an advocate/Chartered Accountant in whole time practice/ Company Secretary in whole time practice/Cost Accountant in whole time practice.
Therefore, for registration of an LLP, you may complete the preparation of documents and forms by yourself but for filing the form with MCA; professional certification is mandatory.
The key regulatory framework for LLPs in India is governed by the Limited Liability Partnership Act, 2008. This legislation sets out the provisions and guidelines for the formation, operation, and dissolution of LLPs in the country. It covers various aspects, including the incorporation process, rights and responsibilities of partners, compliance requirements, and winding up procedures.
The Registrar of Companies (ROC) under the Ministry of Corporate Affairs (MCA) is responsible for the administration and regulation of LLPs.
LLP registration is mandatory if you wish to operate your business as an LLP and take advantage of the benefits and legal status it provides.
Limited Liability Partnership (LLP) and Partnership Firm are two distinct business structures with notable differences.
Liability: In a Partnership Firm, the partners have unlimited liability, meaning they are personally liable for the debts and obligations of the firm. Their personal assets can be used to satisfy business liabilities. In contrast, LLP provides limited liability protection to its partners, shielding their personal assets from the debts and liabilities of the LLP. Partners in an LLP are generally not personally liable for the LLP’s obligations beyond their capital contributions.
Legal Entity Status: A Partnership Firm does not have a separate legal entity from its partners. It operates under the names of the partners, and partners are personally responsible for entering into contracts and holding assets in their own names. On the other hand, an LLP is a separate legal entity distinct from its partners. It can enter into contracts, own assets, sue or be sued in its own name, providing it with a separate legal existence.
No, the LLP does not require MoA and AoA but an LLP agreement that legally binds and governs the rights, duties and obligations of the partners of a Limited Liability Partnership (LLP) is required. It is a crucial document that outlines the internal operations and management of the LLP, as well as the relationship between the partners. The LLP agreement typically covers key aspects relating to Name and address, Nature of business, Capital Contributions, Profit Sharing and Loss distribution, Rights and obligations of Partners, Decision making, Admission and Retirement of Partners, Dispute Resolution etc
To form an LLP, a minimum of two partners are required.
Yes, foreign nationals can be partners in a Limited Liability Partnership (LLP) in India. The LLP Act, 2008 does not impose any restrictions on the nationality or residency of the partners. Therefore, foreign individuals, as well as foreign corporate entities, are allowed to become partners in an LLP registered in India.
In a Limited Liability Partnership (LLP), the term “directors” is not commonly used. Instead, LLPs have designated partners who are responsible for managing and operating the business
DPIN stands for Designated Partner Identification Number. It is a unique identification number issued to designated partners of a Limited Liability Partnership (LLP) in India.The DPIN serves as a recognition of the designated partner and is used for various regulatory filings and compliances. It is similar to a Director Identification Number (DIN) issued to directors of companies.
- he has been found to be of unsound mind by a Court of competent jurisdiction and the finding is in force;
- he is an undischarged insolvent; or
- he has applied to be adjudicated as an insolvent and his application is pending.
Limited Liability Partnership shall have at least two designated partners who are individuals and at least one of them shall be a resident in India.
If at any time the number of partners of a limited liability partnership is reduced to one and the limited liability partnership carries on business for more than six months while the number is so reduced, the person, who is the only partner of the limited liability partnership during the time that it so carries on business after those six months and has the knowledge of the fact that it is carrying on business with him alone, shall be liable personally for the obligations of the limited liability partnership incurred during that period.
LLP incorporation involves following key steps:
- Obtaining Digital Signature Certificate (DSC);
- Name Reservation by filing RUN – LLP (Reserve Unique Name);
- Filing of Incorporation in form Fillip along with necessary attachments such as Identity and address proofs of partners, subscriber’s sheet, consent and declarations etc;
- Receiving of Certificate of Incorporation; and
- Filing of Initial LLP Agreement in Form-3
Yes, foreign nationals can be partners in a Limited Liability Partnership (LLP) in India. The LLP Act, 2008 does not impose any restrictions on the nationality or residency of the partners. Therefore, foreign individuals, as well as foreign corporate entities, are allowed to become partners in an LLP registered in India.
The following forms are filed for LLP incorporation:
1.RUN – LLP (Reserve Unique Name): The form filed for reservation of the name of LLP.
- Form Fillip– The form filed for incorporation of LLP.
- Form-3 – Form for filing of initial LLP Agreement.
The following documents are required for LLP incorporation:
- Identity, address proof and passport size photograph of Designated Partners;
- Identity, address proof and passport size photograph of Partners;
- Registered Office documents – Rent Agreement/Sale Deed/Lease Deed; No objection Certificate (if premises are rented) and utility bill (not older than two months);
- Consent and Declarations to act as Partner/Designated partner; and
- Subscriber’s sheet signed by all partners and Chartered Accountant in practice.
LLP incorporation approximately takes around 10-12 working days, provided that all the necessary documents and information submitted is accurate.
LLP’s are subject to following mandatory compliance requirements:
- Form 11 (Annual Return): LLPs are required to file an Annual Return (Form 11) within 60 days of the closure of the financial year.
- Form 8 (Statement of Accounts and Solvency): LLPs need to file a Statement of Accounts and Solvency (Form 8) within 30 days from the end of six months of the financial year. This statement includes details of assets, liabilities, income, and expenditure of the LLP.
Income Tax Return (ITR-5): LLPs are required to file income tax returns (Form ITR-5) annually, disclosing their income, deductions, and tax liabilities.
There is no specific minimum capital requirement to start a Limited Liability Partnership (LLP). Partners are free to contribute any amount of capital as agreed upon among themselves and the amount of contribution that each partner will contribute is typically mentioned in the LLP Agreement.
Limited Liability partnership is to attract investors (partners) who want to invest in the business without being personally liable for the partnership’s debts. Thus, the main purpose of limited partnership is to combine the benefits of limited liability along with the flexibility and control over management. .
The forms filed for incorporation on an LLP are called LLP incorporation forms. These include following:
- RUN – LLP (Reserve Unique Name): The form filed for reservation of the name of LLP.
- Form Fillip– The form filed for incorporation of LLP
- Form-3 – Form for filing of initial LLP Agreement
An LLP agreement refers to a legally binding agreement that governs the rights, duties and obligations of the partners of a Limited Liability Partnership (LLP). It is a crucial document that outlines the internal operations and management of the LLP, as well as the relationship between the partners. The LLP agreement typically covers key aspects relating to Name and address, Nature of business, Capital Contributions, Profit Sharing and Loss distribution, Rights and obligations of Partners, Decision making, Admission and Retirement of Partners, Dispute Resolution etc
Limited Liability Partnership (LLP) structure is commonly chosen by startups that prefer a flexible and partnership-based business model. LLPs are particularly popular among startups in:
1.Service-oriented businesses such as consulting firms, legal firms, accounting firms etc;
2.Technology start-ups;
- E-commerce business;
- Small and Medium-sized Enterprises (SMEs);
5. Collaborative businesses.
LLPIN stands for Limited Liability Partnership Identification Number. It is a unique identification number assigned to each Limited Liability Partnership (LLP) registered in India. The LLPIN is issued by the Ministry of Corporate Affairs (MCA) as part of the LLP registration process and is mentioned on the Certificate of Incorporation issued by the Registrar of Companies. It is a 7-digit alphanumeric code that serves as a proof of registration of the LLP and is used for all correspondence and transactions related to the LLP.
