A limited liability partnership (LLP) has become the preferred form of organization among entrepreneurs as it combines the benefits of both a partnership company and a corporation in a single form of organization.
In this article, you will learn about LLP company registration. Let’s read on.
The concept of a Limited Liability Partnership (LLP) was introduced in India in 2008. An LLP combines the features of both a partnership and a stock company. Limited Liability Partnership Act 2008 regulates his LLP in India. At least two of her partners are required to form an LLP. However, there is no upper limit on the maximum number of partners for an LLP.
Among the partners, there must be at least two Partners of Record, who must be individuals, at least one of whom must reside in India. The Nominee Partner’s rights and obligations are governed by the LLP Agreement. It is your direct responsibility to comply with all the provisions of the LLP Act 2008 and the provisions set forth in the LLP agreement.
What Is LLP Registration Company
LLP registration in India has become an alternative form of business that offers the benefits of a company and the flexibility of a partner company in a single entity. The concept of LLP in India was introduced in 2008 by the Limited Liability Partnership Act, 2008. This unique hybrid is suitable for small, and medium-sized businesses.
It is very easy to manage and form a limited liability partnership in India. A minimum of 2 partners is required to register an LLP. There is no upper limit. The Limited Liability Partnership agreement sets out the rights and obligations of the partners. In LLP, one partner is not responsible for the other partner’s misconduct and negligence. Partner is responsible for compliance and all terms set forth in the LLP agreement.
How to set up LLP in India?
Issuance of Digitally signature certificate (DSC)
Getting a DSC for a potential spouse is the first step. Members can use the same DSC to file tax returns, LLP registration applications, and ROC compliance documents.
Request a DPIN
Submit an application form DIR3 for Designated Partner Number.
Approve company name
A unique name for the LLP is required to avoid rejection of the application. Once the applicant has DSC and DPIN, she must apply for LLP name approval by visiting the ROC through the MCA’s official portal RUN-LLP.
Submit the eform Fil LLP incorporation application
After ROC approval of the company name, the application for incorporation must be submitted using the FillLLP eForm. Complete information about the proposed Partner of Record is included on the LLP Form.
Please attach the form and all required documents
Applicants must submit the form to the ROC for the particular state or province where the registered LLP is located.
Submit the Form 3 LLP Agreement
Within 30 days from the date of incorporation submit LLP agreement on the MCA portal. An LLP agreement outlining a partner’s obligations may be a private agreement.
The LLP contract must be stamped or signed on a stamp of Rs.10. Stamp prices vary by state.
What Are the Benefits of LLP
Here are some benefits of LLP (Limited Liability Partnership):
Independent legal entity:
LLPs have separate legal entities as well as legal entities. An LLP is different than a partner. An LLP can sue or be sued on its own behalf. The contract is signed on behalf of LLP. This helps earn the trust of various stakeholders and gives customers and suppliers a sense of trust in the company.
Partner’s Limited Liability:
LLP shareholders have limited liability. Partner’s liability is limited to the contributions made by Partner. This means that they only have to pay for the contributions and are not personally responsible for the company’s losses. If the LLP becomes insolvent upon dissolution, only the assets of the LLP are obligated to pay its debts. Partners do not take personal responsibility, so they can act as reliable businessmen.
Low cost and low compliance:
The cost of setting up an LLP is small compared to the cost of setting up a public or limited company. The compliances that will be followed by the LLP will also be low. The LLP requires to file only 2 statements annually, an Annual Return and a Statement of Accounts and Solvency.
No minimum capital contribution required:
An LLP can be incorporated with no minimum capital. No minimum capital is required prior to incorporation. It can be established with voluntary investment by shareholders.
How Much Does an LLP Cost
A limited liability partnership (LLP) is a business structure that combines the liability protection of a corporation with the tax benefits of a partnership. In an LLP, the partners are not personally liable for the debts and obligations of the business. Below are the government LLP costs for form submissions:
- DSC (around Rs. 1500-2000 for 2 partners (varies by agency)
- DIN (Rs. 1000 for 2 partners)
- Name Reservation (Around Rs. 200)
- Incorporation (It depends on the investment amount. investment up to Rs. 1 lakh – Rs. 500, donations between Rs. 1 lakh to 5 lakhs – Rs. 2000).
- LLP Agreement Depends on your investment. Contribution up to Rs 1 lakhs – Rs 50 for filing Form 3 and stamp duty based on the state in which the LLP is established
What Are the Disadvantages of an LLP
Here are some disadvantages of an LLP((Limited Liability Partnership):
Penalties on non-compliance:
The compliance that an LLP must adhere to is minimal. However, if these compliances are not completed on time, the LLP will have to pay heavy penalties. A return must be filed with the Office of Corporate Affairs (MCA) each year, even if the LLP is inactive for the year. If it fails to file the returns, then the LLP will have to pay severe penalties.
LLP liquidation and dissolution:
To form an LLP, needs at least two partners. If the minimum number of partners is less than 2 for 6 months, the LLP will be dissolved. An LLP can be dissolved if it is unable to pay its debts.
Difficulty in raising funds:
LLPs do not have the concept of stocks or shareholders like companies. Angel investors and venture capitalists cannot invest in LLPs as shareholders. Because the shareholders are the partners of the LLP and must undertake all the tasks of the partners. Therefore, angel investors and venture capitalists prefer to invest in companies rather than LLPs, making it difficult for LLPs to raise capital.
What Is the Minimum Capital Required for LLP
There is no minimum amount of capital contribution required by the partners and all related to the capital contribution aspect of the LLP is solely governed by the terms of the LLP Agreement.
Who Cannot Partner in LLP
A HUF cannot be treated as a legal entity under the 2008 LLP Act.
Frequently Asked Questions (FAQs):
Can I register LLP by myself?
Yes, register at the corporate affairs website designed for LLP services.
Is LLP better or Pvt Ltd?
If you are planning to run a small business with a partner and limited capital, an LLP is a right choice. On the other hand, if the company is looking for aggressive growth and large amounts of capital, then a limited liability company should be chosen.
Is GST registration mandatory for LLP?
The GST Act required LLPs with an annual turnover exceeding ₹20 lakhs to register as taxable companies.
Can LLP take loan from bank?
LLPs can take loans as much as they want from banks and financial institutions.
Is bank account mandatory for LLP?
Yes, a bank account is mandatory for LLP.
Conclusion
Now you got to know LLP company registration. Each LLP must have at least two designated partners, at least one of whom must reside in India. If all partners of an LLP are corporate entities, at least two individual nominees of those corporate entities must act as designated Partners.