What is a Limited Liability Partnership (LLP)?
Limited Liability Partnership (LLP) is a form of partnership in any kind of business enterprise, where all the participating members have limited liabilities. This means that no single partner is responsible for the losses, negligence and/or misconduct of any other partner. Since all partners have limited and not total responsibility, this is known as Limited Liability Partnership. Unlike shareholders, partners possess the rights to manage the business as well. Owing to these characteristics, it can be said that LLPs seem to show characteristics of both corporations and partnerships.
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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.
Also Read: What is fee for MSME Registration?
Documents Required for LLP Registration
The documents required to register your LLP are roughly the same as required for most business set-ups. However, there are two sets of documents that will need to be submitted for the LLP registration i.e. documents required of partners and the LLP documents.
Documents of Partners
All partners in the LLP will be required to submit the following:
- Identity proofs and PAN cards of all partners.
- Address Proofs of partners that include Voter ID, passport or driving license.
- A passport size photograph against a white background.
- Passports of NRIs and foreign nationals who wish to become partners in an LLP.
Documents of LLP
Documents related to the LLP entity that needs to be compulsorily submitted are:
- A proof of the registered office of address needs to be submitted at the time of registration or within a time span of 30 days of the incorporation of the LLP. In case, the registered office is a rented facility, an NOC from the landlord is necessary. Additionally, at least one proof of residence will need to submit such as utility bills that are no older than 2 months.
- A Digital Signature Certificate (DSC)
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What is the cost of LLP registration?
Find below the cost involved in the registration process:
DSC – Around Rs. 1500-2000 for 2 partners
Name Reservation – Rs. 200
Incorporation – Depends on capital contribution
Contribution up to Rs. 1 lakh – Rs. 500 & Contribution between Rs. 1 and 5 lakh – Rs. 2000
LLP Agreement -Depends on capital contribution.
Contribution up to Rs 1 lakh – Rs 50 for filing Form 3 and stamp duty based on the state where LLP is formed
Limited Liability Partnerships in India
Limited Liability Partnerships in India are based on the Limited Liability Partnership Act of 2008. The Limited Liabilities Partnership Act 2008 was officially published on the 9th of January, 2009 in the official Gazette of India and has been effective since 31st March, 2009. The rules constitutive of this act were later published on the 1st of April, 2009 and amended in 2017. The official incorporation of the LLP happened on the 2nd of April, 2009. An LLP is attractive for many new entrepreneurs since the cost of forming an LLP is little; there is no minimum capital contribution and very few compliance regulations as compared to other kinds of business enterprises. Like many entrepreneurs seeking to become part of an LLP or set it up, you can avail of a range of business loans that will help you in starting a new business or for business expansion purposes.
Benefits of attaining LLP Registration
- Limited Liability: The liability of the partners in limited and its limited only to their contribution
- LLP can be easily transferred to one person from another
- No audit required up to turnover less than Rs. 40 lakh and Rs. 25 lakh as capital contribution
- LLP holds the right to own and transfer property and this can be performed under their own name
- LLP’s existence is still considered even after the death of any partner
- LLP is a separate legal entity and both the partner or juristic person who is not connected with partnership can sue each other or can be sued
- No dividend tax in case of an LLP
Eligibility Criteria to obtain LLP Registration
- Minimum age required to start an LLP is 18 years, but person below 18 years can become a member as well
- Minimum two individuals are required to start an LLP
- No maximum limit of partners
- No minimum capital required to start an LLP except stamp duty
- One person should be Indian resident
- Name uniqueness should be there for an LLP
- Name should not be similar to already existing company
Why do business owners prefer LLP over Partnership Registration?
- LLP is a separate legal entity whereas Partnership firm is not liability of partners is limited to the extent of their contribution. In partnership the liability of partnership is not limited
- LLP formation requires two designated partners. In partnership the maximum capping is up to 50 partners
- LLP registration is mandatory and is done with Ministry of Corporate Affairs, whereas Partnership firms are registered under Registrar of firms
- LLP’s name should be unique and should duplicate any existing name but there is no restriction for using name in Partnership
- The credibility of an LLP is higher than that of a Partnership firm
FAQs on LLP Registration
Q. How much time does it take to register as an LLP?
Ans. The total time for registering an LLP is approximately 15 days.
Q. How much does it cost to register as an LLP?
Ans. Registering for an LLP costs from Rs. 2500 – Rs. 6000 depending on the number of partners and the capital contribution.
Q. What are the restrictions in respect of minimum and maximum number of partners in an LLP?
Ans. The minimum number of partners required to start a LLP is two and there is no limit to the maximum number. In case of partnership the minimum partners remains two, whereas the maximum can reach up to 50.
Q. Whether a body corporate may be a partner of an LLP?
Ans. Yes, an individual or a body corporate can be a partner of an LLP.
Q. What are the qualifications for becoming a partner?
Ans. Any individual who is literate and competent enough to contract can become a partner. No major qualifications are required.
Q. What are the requirements in respect of “Designated Partners”?
Ans. There should be at least 2 Designated Members to be appointed to form a LLP. Designated Partners are primarily accountable for regulatory and legal compliances, as well as responsible for their liability as ‘partners, per-se”.
Q. Who can be a “Designated Partner”?
Ans. Any 2 individuals who are resident of India, partners of LLP or nominees of bodies corporate are considered as Designated Partners.