Limited Liability Partnership (LLP) REGISTRATION
LLP stands for Limited Liability partnership. LLP is a mix of a traditional partnership and a company as some of its features are similar to a traditional partnership and some matches with a company.
A Limited Liability Partnership (LLP) is a unique type of business setup that blends a partnership's and a company's features. In an LLP, partners enjoy limited liability, similar to shareholders in a company, while also benefiting from the flexibility and simplicity of a partnership. This arrangement grants the LLP its legal identity, allowing it to take legal actions and be subject to legal actions separately from its partners.
LLPs have become popular among entrepreneurs in various industries because they shield partners' assets and have more straightforward regulatory requirements than traditional corporations. The concept of LLP was introduced in India in 2008 and is governed by the Limited Liability Partnership Act, offering a dependable and adaptable option for businesses of all sizes. Among the partners, there should be a minimum of two designated partners who must be natural persons, and at least one of them should be resident in India. The rights and duties of designated partners are governed by the LLP agreement. They are directly responsible for the compliance of all the provisions of the LLP Act, 2008 and provisions specified in the LLP agreement.
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Features of LLP
1. It has a separate legal entity just like companies.
2. Minimum two persons should come together as designated partners to establish LLP.
3. There is no upper limit on the maximum number of partners.
4. There must be a minimum of two designated partners.
5. Atleast one designated partner must be a resident of India.
6. The liability of each partner is limited to the contribution made by the partner.
7. The cost of forming an LLP is low.
8. Less compliance and regulations.
9. No requirement of minimum capital contribution.
Advantages of LLP
The advantages of a Limited Liability Partnership (LLP) are elaborated in detail below:
Own Legal Identity: An LLP is like its own person, just like big companies. This helps people trust and work with it, as it can do legal things independently.
Less Risk for Partners: LLP partners are only responsible for what they put in. They don't have to pay for all the debts or losses, which is good for their reputation.
Saves Money and Time: Starting an LLP costs less and has fewer rules than big companies. There's less paperwork to do every year.
No Fixed Money Needed: You don't need much money to start an LLP. Partners can put in whatever amount they want.
Disadvantages of LLP
Certainly, Limited Liability Partnerships (LLPs) present numerous advantages despite a few inherent disadvantages:
Getting in Trouble for Not Following Rules: Even though LLPs have fewer rules, they can get big fines if they don't follow them on time. Even if an LLP doesn't do anything in a year, it still needs to tell the government or get fined.
Ending an LLP: An LLP needs at least two partners. It must stop if it has fewer than two partners for six months. Also, it might have to close if it can't pay its debts.
Hard to Get Big Money: LLPs don't work like big companies where people invest money and become owners. This makes it tricky to get a lot of money from investors.
LLP Registration Prerequisites and Eligibility Conditions
To qualify for the registration of an LLP company in India, you must adhere to the subsequent criteria:
1. Minimum of Two Partners: Establishing a Limited Liability Partnership in India necessitates a minimum of two partners, with no upper threshold on the maximum number of partners.
2. Designated Partners: Within the partnership framework, at least two selected partners are obligatory, and they must be natural individuals. At least one of these designated partners must also maintain residency in India.
3. Nomination for Body Corporate Partner: If a body corporate assumes the role of a partner, the designation of a natural person must act as its representative.
4. Agreed Contribution: Each partner is required to contribute the shared capital of the LLP, as stipulated and agreed upon.
5. Minimum Authorized Capital: LLP can be started with a capital of Rs. 10,000.
6. Indian Resident Designated Partner: At least one designated partner of the LLP must hold a resident status in India.
By satisfying these prerequisites, you can progress with the registration of an LLP in India and avail the advantages bestowed by this business structure.
Process of Registration as New LLP
Registering for an LLP is a relatively easy process that can be summed up in simple steps as mentioned below:
Step 1: Getting Digital Signature Certificate (DSC)- The first step towards registering LLP is to acquire the digital signatures of all the designated partners of the LLP. A digital signature is required since the LLP’s documents are filed online. These documents carry digital signatures that further helps in obtaining certificate. Digital signatures required can be obtained from certified government agencies, such as National Informatics Center, IDRBT Certifying Authority, E-MUDHRA, CDAC and NSDL. The cost of acquiring a DSC will be according to the certifying agency that the applicant has applied for.
Step 2: Reserving the Name- To register a proposed LLP, the applicant needs to get a Limited Liability Partnership-Reserve Unique Name (LLP-RUN) that can be processed at the Central Registration Centre. However, before citing or quoting the name, it is always advisable to check from the Ministry of Corporate Affairs (MCA) portal for a free name. This will provide a list of companies with the same or similar names to a proposed LLP. Once the name has been chosen, the Registrar will approve the name that is not very similar to any existing LLP. The LLP-RUN will need to be submitted along with a fee that will then proceed for the approval of the registrar.
Step 3: Incorporation of LLP- Form for incorporation of Limited Liability Partnership (FiLLiP) is required to be filled and submitted with the registrar for incorporation of LLP. Fees has to be paid as per Annexure ‘A’. Application for allotment shall be permitted to be made by 2 individuals only.
Step 4: File Limited Liability Partnership Agreement- This agreement governs the mutual rights and duties amongst the partners. The agreement can be filed in form 3 online on MCA Portal. From the date of incorporation, Form 3 for LLP agreement has to be filed within 30 days. LLP Agreement has to be printed on Stamp Paper, wherein every state has their different stamp paper.
It takes approximately 15 days to get DSC and Form 3, subject to availability of all the documents
Documents Required for LLP Registration
To initiate the registration process for an LLP, partners are required to furnish the following documents:
1. PAN Card/ID Proof of Partners: Partners need to submit the self-attested copy of documents i.e. Voter's ID, Passport, PAN, Driver's License, or Aadhaar Card.
2. Residence Proof of Partners: Partners need to provide recent documents such as a bank statement, telephone bill, mobile bill, electricity bill, or gas bill of not older than last 2 months.
3. Passport-size Photograph: Partners should provide a passport-size photograph with a white background.
4. For Foreign Nationals and NRIs: Foreign nationals and NRIs intending to partner in an Indian LLP should submit their passport. Additionally, proof of address, such as a driving license, bank statement, residence card, or any government-issued identity proof containing the address, is required.
5. Proof of Registered Office Address: This includes the landlord's rent agreement and a no-objection certificate if the office space is rented. A recent utility bill (gas, electricity, or telephone) with the complete address and owner's name (dated two months or older) should also be submitted.
6. Digital Signature Certificate (DSC): All designated partners must have a DSC for digitally signing documents.
Execution of the LLP Agreement:
Once the LLP Agreement is meticulously drafted, it undergoes a thorough review and agreement among all partners. Once consensus is reached, the agreement moves to the execution stage, involving the following steps:
Payment of Stamp Duty: The LLP Agreement attracts a stamp duty, which must be paid in accordance with the applicable state laws.
Signing by Partners: All partners involved in the LLP must sign the agreement, indicating their acceptance and commitment to its terms.
Attestation by Witnesses: The signed LLP Agreement is attested by witnesses, validating the authenticity of the signatures and the document.
Once all partners thoroughly review and agree upon the LLP Agreement, it will be executed by paying the necessary stamp duty. The amount of stamp duty required will be determined by the respective State Stamp Act of the location where the registered office of the LLP is situated. After the payment of stamp duty, the agreement will be formally executed with the signatures of the partners and attestation by witnesses.
Why Choose The Startup Trends as Your LLP Registration Consultant?
At The Startup Trends, we provide end-to-end legal assistance in setting up a Limited Liability Partnership. Our services extend from documentation to incorporation, and post-incorporation compliance as well. We have a team of experienced professionals who render services on our behalf. Besides, our customer support is extremely robust and available 24*7 to resolve your queries.