A Limited Liability Partnership (LLP) is a distinct legal entity that shares similarities with a Private Limited Company in terms of its ability to sue and be sued in its own name. The key characteristic of an LLP is that the liability of each partner is limited to their respective contributions to the partnership.
LLP registration in India offers businesses a unique structure that combines the advantages of a company with the flexibility of a partnership. The concept of LLP was introduced in India in 2008 through the Limited Liability Partnership Act. This form of organization is particularly well-suited for small and medium-sized businesses.
Registering an LLP in India is a relatively straightforward process and offers ease of management. It requires a minimum of two partners, with no upper limit specified. The LLP agreement outlines the rights and duties of the partners, establishing the framework for their collaboration. Importantly, in an LLP, one partner is not held responsible for the misconduct or negligence of another partner. Each partner is accountable for compliance with the provisions outlined in the LLP agreement.
Overall, an LLP provides a favorable business structure, ensuring limited liability for partners while offering the flexibility and benefits of a partnership arrangement.
Limited Liability Partnership (LLP) offers several benefits to businesses and partners involved:
- Limited Liability: The primary advantage of an LLP is limited liability protection. The personal assets of partners are safeguarded, and they are not personally liable for the debts or liabilities of the LLP. Each partner’s liability is limited to the extent of their agreed-upon contribution.
- Separate Legal Entity: An LLP is a separate legal entity distinct from its partners. It can own assets, enter into contracts, sue, and be sued in its own name. This provides a level of legal protection and allows for efficient management and continuity of the business.
- Flexibility in Management: LLPs offer flexibility in management, allowing partners to define their roles, responsibilities, and profit-sharing arrangements in the LLP agreement. There are no rigid requirements for board meetings or annual general meetings, providing more freedom in decision-making and operations.
- Easy Formation and Compliance: Registering an LLP is a relatively simple and cost-effective process compared to incorporating a company. There are fewer compliance requirements, making it easier for small and medium-sized businesses to set up and operate. LLPs also have more relaxed auditing and reporting requirements.
- Taxation Benefits: LLPs enjoy a favorable tax structure. The profits of an LLP are taxed at the partnership level, avoiding the double taxation typically associated with companies. Partners can also claim tax deductions for contributions made to the LLP.
- Partnership Structure: LLPs retain the benefits of a partnership structure, including flexibility in profit-sharing, decision-making, and distribution of responsibilities. It allows partners to leverage their individual skills and expertise while sharing the risks and rewards of the business.
- Perpetual Succession: An LLP has perpetual succession, meaning it continues to exist regardless of changes in partners. The death, retirement, or resignation of a partner does not affect the LLP’s continuity, ensuring stability and business continuity.
- Professional Reputation: Operating as an LLP can enhance the professional reputation of the business, as it is seen as a more formal and organized business structure compared to a traditional partnership.
These benefits make LLP an attractive option for professionals, small and medium-sized businesses, and ventures requiring limited liability protection while maintaining flexibility and ease of operation. However, it is important to consider the specific legal and regulatory requirements of the jurisdiction in which the LLP is formed.
Checklist/Requirements for Registering a Limited Liability Partnership (LLP):
Basic Requirements:
- Minimum of 2 Designated Partners required (No maximum limit)
- At least 1 Designated Partner must be a resident of India
- Registered address for the LLP
Documents Required for Each Partner of LLP:
- PAN Card* (mandatory for Indian nationals and others if held)
- Aadhaar Card* (mandatory for Indian nationals and others if held)
- Passport* (for NRIs, foreigners, and Indian nationals if held)
- Address Proof (any one, not older than 2 months): a. Bank Statement b. Phone Bill c. Mobile Bill d. Electricity Bill
(Note: For NRIs and foreigners, documents issued by foreign authorities or signed outside India must be notarized and apostilled)
Documents Required for Registered Address:
- No Objection Certificate (NOC) from the owner*
- Rent Agreement*
- Tax Paid Challan (if the property is owned)
- Utility Bill*
Please note that the documents marked with an asterisk (*) are mandatory for all partners, while the others may vary based on individual circumstances.
It is advisable to consult with a professional or legal expert to ensure compliance with the specific registration requirements and procedures for LLP registration in your jurisdiction.
To register and process a Limited Liability Partnership (LLP), you can follow the steps outlined below:
Step 1: Application for Digital Signature Certificate (DSC) Obtain a Digital Signature Certificate (DSC) for all the designated partners of the LLP. This can be done by submitting an application with the relevant authorities or through authorized agencies.
Step 2: Apply for Name Reservation Submit an application for reserving the proposed name of the LLP to the Registrar of Companies (RoC). The name should comply with the naming guidelines and should not conflict with any existing trademarks or company names. The RoC will review the application, and upon approval, the name will be reserved for a specific period.
Step 3: Draft LLP Agreement/Deed Prepare the LLP Agreement or Deed which outlines the mutual rights, duties, and obligations among the partners and the LLP. The agreement should comply with the LLP Act and the relevant rules. It should be duly signed and notarized by the designated partners.
Step 4: Application for LLP Registration Submit an application for LLP registration to the RoC. The application should include the necessary documents, such as the LLP Agreement, address proof, identity proof of the partners, and other required information. The application should be accompanied by the prescribed fees.
Step 5: Issue Certificate of Incorporation, PAN, and TAN Once the RoC reviews the application and is satisfied with the provided documents, they will issue a Certificate of Incorporation for the LLP. The LLP will also receive a Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) from the respective authorities.
It’s important to note that the specific procedures and requirements may vary slightly depending on the jurisdiction and the regulations in force at the time of registration. It is advisable to consult with a legal professional or a company registration service to ensure compliance with all the necessary formalities and to obtain accurate and up-to-date information.
Key deliverables in the process of registering a Limited Liability Partnership (LLP) are as follows:
a. Digital Signature Certificate (DSC) of Partners: Each designated partner of the LLP needs to obtain a Digital Signature Certificate. The DSC is used for digitally signing the documents related to the LLP registration process.
b. Certificate of Incorporation along with PAN & TAN: Upon successful registration of the LLP, the Registrar of Companies (RoC) will issue a Certificate of Incorporation. This certificate serves as proof of the LLP’s existence as a separate legal entity. Along with the Certificate of Incorporation, the LLP will also receive a Permanent Account Number (PAN) and a Tax Deduction and Collection Account Number (TAN). PAN is required for various tax-related transactions, while TAN is necessary for deducting and remitting taxes on behalf of the LLP’s employees or contractors.
c. LLP Agreement: The LLP Agreement is a crucial document that outlines the rights, duties, and obligations of the partners, as well as the internal workings of the LLP. It includes details such as the capital contribution of each partner, profit sharing ratio, management structure, decision-making processes, and other terms agreed upon by the partners. The LLP Agreement is to be drafted and signed by all the designated partners of the LLP.
These key deliverables are essential for the successful registration and operation of the LLP. It’s important to retain copies of these documents in a secure manner, as they may be required for various legal, regulatory, and financial purposes throughout the LLP’s existence.
What do you want to know?
The approved name of LLP shall be valid for a period of 3 months (90 days) from the date of approval.
No, the name of an LLP cannot end with words such as ‘Limited’ or ‘Pvt. Limited’. Name of an LLP shall end with either ‘Limited Liability Partnership’ or ‘LLP’. The word ‘limited’ shall be allowed in name only within ‘Limited Liability Partnership’.
Every partner shall inform the LLP of any change in his name or address within a period of fifteen days of such change. The LLP, in turn, would be under obligation to file such details with the Registrar within thirty days of such change.
E-form 3 (for change in LLP agreement and e-form 4 are required to be filed for appointment of new and resignation of existing partners within thirty days of such cessation or appointment without additional fee and with additional fee thereafter.
Yes, any LLP can close its business in India by adopting either of the following two ways: 1. Declaring the LLP as Defunct 2. Winding up of LLP.
LLP is required to file LLP Form 8 (Statement of Account & Solvency) and LLP Form 11 (Annual Return) annually. The ‘Annual Return’ is required to be filed within 60 days of close of the financial year and ‘Statement of Accounts & Solvency’ shall be filed within 30 days from the end of six months of the financial year to which it relates. Every LLP has to maintain uniform financial year ending on 31st March of a year.
Yes, pursuant to the provisions of the Limited Liability Partnership Act, 2008, it is required to have one Resident Designated Partner in an LLP.
Yes, an existing partnership firm can be converted into LLP by complying with the Provisions of clause 58 and Schedule II of the LLP Act. Form 17 needs to be filed along with Form 2 for such conversion and incorporation of LLP.
Yes, any existing private company or existing unlisted public company can be converted into LLP by complying with the Provisions of clause 58 and Schedule III and IV of the LLP Act. Form 18 needs to be filed with the registrar along with Form 2 for such conversion.
Like physical documents are signed manually, electronic documents (such as e-forms) are required to be signed digitally by using a Digital Signature Certificate (DSC).