LIMITED LIABILITY PARTNERSHIP
Limited Liability Partnership (LLP) Registration in India has become an alternative form of business that provides the advantages of a Company and the flexibility of a Partnership firm into a single organization.
The Concept of LLP in India was introduced back in 2008 by the Limited Liability Partnership Act of 2008. This unique hybrid is suitable for setting small, medium-sized businesses.
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NATURE OF LIMITED LIABILITY PARTNERSHIP (LLP)
Limited Liability Partnership (LLP) Registration in India has become an alternative form of business that provides the advantages of a Company and the flexibility of a Partnership firm into a single organization.
The Concept of LLP in India was introduced back in 2008 by the Limited Liability Partnership Act of 2008. This unique hybrid is suitable for setting small, medium-sized businesses.
It is very easy to manage and incorporate a Limited Liability Partnership in India. To register an LLP minimum of two partners are required. The LLP agreement states the rights and the duties of the Partners. In an LLP one partner is not responsible for the misconduct and negligence of the other partner. The partners are responsible for the compliances and all the provisions that are specified in the LLP agreement.
FEATURES OF LLP
- It has a separate legal entity just like companies.
- The liability of each partner is limited to the contribution made by the partner.
- The cost of forming an LLP is low.
- Less compliance and regulations.
- No requirement of minimum capital contribution.
ADVANTAGE OF LLP
- Separate legal entity- An LLP has a separate legal entity, just like companies. The LLP is distinct from its partners. An LLP can sue and be sued in its own name. The contracts are signed in the name of the LLP.
- No limit on owners of the business- An LLP requires a minimum of 2 partners while there is no limit on the maximum number of partners. This is in contrast to a private limited company wherein there is a restriction of not having more than 200 members
- Limited liability of the partners- The partners of the LLP have limited liability. The liability of the partners is limited to the contributions made by them. This means that they are liable to pay only the amount of contributions made by them and are not personally liable for any loss in the business. If an LLP becomes insolvent at the time of winding up, only the LLP assets are liable for clearing its debts. The partners have no personal liabilities, and thus they are free to operate as credible businessmen.
- No requirement of minimum contribution- There is no minimum capital requirement in LLP. An LLP can be formed with the least possible capital. Moreover, the contribution of a partner can consist of tangible, movable or immovable or intangible property or other benefits to the LLP.
- Low cost and less compliance –The cost of forming an LLP is low compared to the cost of incorporating a public or private limited company. The compliances to be followed by the LLP is also low. The LLP needs to file only two statements annually, i.e. Annual Return and a Statement of Accounts and Solvency.
- No requirement of minimum capital contribution- The LLP can be formed without any minimum capital. There is no requirement of having a minimum paid-up capital before going for incorporation. It can be formed with any amount of capital contributed by the partners.
- No requirement of compulsory Audit- All companies, whether private or public, irrespective of their share capital, are required to get their accounts audited. But in case of LLP, there is no such mandatory requirement.
- Dividend Distribution Tax (DDT) not applicable- In the case of a company, if the owners to withdraw profits from the company, additional tax liability in the form of DDT @ 15% (plus surcharge & education cess) is payable by the company. However, no such tax is payable in the case of LLP and profits of an LLP can be easily withdrawn by the partners.
- Separate legal entity- An LLP has a separate legal entity, just like companies. The LLP is distinct from its partners. An LLP can sue and be sued in its own name. The contracts are signed in the name of the LLP.
DOCUMENTS FOR REGISTRATION OF LLP
Documents of Partners
- PAN Card/ ID Proof of all the partners.
- Address Proof of Partners –Any one document out of Voter’s ID, Passport, Driver’s license or Aadhar Card
- Residence Proof of Partners – Latest bank statement, telephone bill, mobile bill, electricity bill or gas bill should be submitted as residence proof. Such bill or statement shouldn’t be more than 2-3 months old and must contain the name of partner as mentioned in PAN card.
- Photograph of all Partners should also provide their passport size photograph.
- Passport (in case of Foreign Nationals/ NRIs) – For becoming a partner in Indian LLP, foreign nationals and NRIs have to submit their passport compulsorily.
- Foreign nationals or NRIs have to submit proof of address also which will be a driving license, bank statement, residence card or any government-issued identity proof containing the address.
Documents of LLP
- Proof of Registered Office Address: Proof of registered office has to be submitted during registration or within 30 days of its incorporation.
- If the registered office is taken on rent, a rent agreement and a no-objection certificate from the landlord has to be submitted. No objection certificate will be the consent of the landlord to allow the LLP to use the place as a ‘registered office’.
- Digital Signature Certificate: One of the designated partners needs to opt for a digital signature certificate also since all documents and applications will be digitally signed by the authorized signatory
TIMELINES FOR LLP REGISTRATION
The partnership firm registration process takes approximately 10 days, subject to departmental approval and reverts from the respective department.
FAQs ON LLP REGISTRATION
Q1. Is LLP registration mandatory?
Yes, an registration of an LLP on the Ministry of Corporate (MCA) portal is mandatory. An LLP must obtain registration under the Limited Liability Partnership (LLP) Act to be a legally valid entity.
Q2. How to be a Partner in an LLP?
The designated Partner must be a natural person who is above 18 years of age. LLP Act 2008 allows a foreign national including Foreign Companies to incorporate an LLP in India, provided at least one designated partner is Indian.
Q3. How much capital is required to start a Limited Liability Partnership?
An LLP can be started with any amount of money there is no such minimum requirement. A partner may contribute both tangible and intangible property.
Q4. What is the difference between LLP and a Partnership Firm?
An LLP must be registered under the LLP Act to operate its business. However, the registration of a partnership firm is voluntary under the Partnership Act, 1932.
The liability of each partner is limited to the contribution made by the partner in an LLP. But in a partnership firm, all partners are personally liable for the loss/debts of the firm.
The LLP has a separate legal entity, i.e. it can buy property, sue and be sued in its name. Partnership firms cannot buy a property or sue anyone in the partnership firm’s name.
Q5. Does LLP require MoA and AoA?
No, the Memorandum of Association (MOA) and the Articles of Association (AOA) are important documents of a company registered under the Companies Act, 2013. The LLP agreement governs the LLP and not the MOA and AOA. Thus, an LLP does not have to draft the MOA and AOA. It has to draft the LLP agreement.
Q6. Should directors be appointed to an LLP?
No, there are no directors in an LLP. An LLP does not have to appoint directors or have a board of directors. The partners govern the business of an LLP. The partners take decisions regarding the working and business of the LLP. Thus, an LLP needs to have a minimum of two partners at all times.
Q7. Can we convert a Partnership Firm into an LLP?
An existing partnership firm or a Company that is unlisted can be converted into an LLP. This conversion into an LLP brings in many benefits.
Q8. Who can be partners in an LLP?
Any individual or body corporate can be a partner in an LLP. However, minors, persons of unsound mind and an undischarged insolvent cannot be partners in an LLP.
