Limited Liability Partnership Incorporation

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Limited Liability Partnership Registration in India - An Overview

In the contemporary business landscape, the Limited Liability Partnership (LLP) has emerged as a popular and efficient business vehicle, blending the features of partnerships and corporations. Its unique structure, which allows for flexibility combined with limited liability, makes it an attractive option for entrepreneurs and professionals alike. This essay delves into the concept of LLP, its characteristics, advantages, disadvantages, and its impact on the business world.

The concept of an LLP is relatively new in many legal systems, including India, where it was introduced with the Limited Liability Partnership Act of 2008. An LLP is a hybrid form of business organization that possesses both the attributes of a partnership and a corporation. In an LLP, all partners have limited liability, meaning their personal assets are protected from the business’s debts and obligations.

LLPs do not have a minimum capital requirement, making them accessible for startups and small businesses. The most significant feature of an LLP is the limited liability conferred upon its partners. This means that partners are not personally liable for the business’s debts, unlike in a traditional partnership. Unlike corporations, LLPs offer flexibility in management. The partners can directly manage the business, and the internal structure can be tailored as per the partnership agreement.

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Process of Incorporation of LLP in India

The first step is to acquire Digital Signature Certificates for the designated partners. DSCs are required for signing electronic documents and forms submitted to the MCA.

Every designated partner needs to have a DIN or DPIN. If the designated partners already have a DIN (from their involvement in other companies), the same can be used.

The next step is to file an application for reservation of the LLP name through the “RUN-LLP” (Reserve Unique Name – Limited Liability Partnership) service on the MCA portal. The name should be unique and not similar to any existing company or LLP.

Once the name is approved, file the incorporation document, i.e., Form FiLLiP (Form for incorporation of Limited Liability Partnership), with the Registrar of Companies (ROC). This form will include details such as the name of the LLP, address of the registered office, details of the designated partners and partners, and their consent.

After the incorporation process, the LLP Agreement needs to be filed within 30 days of incorporation. The LLP Agreement lays down the mutual rights and duties among the partners and between the LLP and its partners. It is filed using Form 3 on the MCA portal.

The following documents are generally required for LLP registration:

  • Proof of address of the registered office.
  • No-objection certificate from the owner of the property.
  • Subscriber’s sheet including consent of the partners.
  • Details of partners and designated partners (DPIN/DIN, address proof, identity proof, etc.).
  • Digital Signature Certificate of designated partners.

The incorporation process involves payment of the requisite government fees and stamp duty, which depends on the state in which the LLP is being incorporated.

After verifying the documents and details, the ROC issues a Certificate of Incorporation. The LLP is now legally recognized and can start its operations.

After incorporation, apply for Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) for the LLP.

Finally, open a bank account in the name of the LLP to manage its finances.

Depending on the nature of the business, the LLP may need to register for Goods and Services Tax (GST), Professional Tax, Employees’ State Insurance (ESI), Provident Fund (PF), and other applicable statutory requirements.

Documents Required for LLP Registration

PAN Card of proposed Directors

Both PAN and Aadhaar Card of all Indian Shareholders and Directors.

Business Address Proof

If Owned Property: Copy of Registry and Latest Govt. Electricity Bill. If Rented Property: Rent Agreement + Latest Govt. Electricity Bill + NOC from Landlord.

Document of proposed Directors

Utility Bill/Telephone Bill/Mobile Bill/Bank Statement not older than two months.

Mail id and Mobile number

Mail id and Mobile number of proposed Directors along with Draft Articles of Association and Draft Memorandum of Association.

Passport size photograph

Latest passport size photograph of proposed Directors.

Aadhaar Card/Passport

Aadhaar Card/ Passport of proposed Directors.

Advantages of LLP Registration

One of the primary advantages of an LLP is the limited liability protection it offers to its partners. This means that the personal assets of the partners are protected from the debts and liabilities of the business. Partners are liable only to the extent of their contribution to the LLP.

LLPs offer significant flexibility in terms of internal management and business operations. Unlike corporations, LLPs are not bound by rigid corporate structures. The partners have the liberty to manage the affairs of the business as per the agreement they set out.

Setting up an LLP is generally simpler and involves less compliance compared to a corporation. The process of registering an LLP is straightforward, and the ongoing compliance requirements are less onerous.

There is no minimum capital requirement to form an LLP. This makes it easier for small or medium-sized businesses or professionals to start their ventures without the need for substantial capital investment.

LLPs can have certain tax advantages, depending on the jurisdiction. For instance, in some countries, an LLP is not subject to corporate tax, and profits are taxed only at the individual partner level, avoiding double taxation.

An LLP is a separate legal entity from its partners. This means that it can own assets, enter into contracts, and be a party to legal proceedings in its own name.

An LLP continues to exist beyond the changes in partnership or even the death of a partner, ensuring continuity of the business.

In some jurisdictions, LLPs are not required to have their accounts audited if they fall below certain thresholds of turnover and capital contribution, simplifying the financial reporting process.

An LLP is required to maintain and file records with the relevant authorities, which brings transparency in business operations and builds credibility with stakeholders.

The structure of an LLP can be attractive to investors, particularly for startups and growing businesses, due to the combination of limited liability and operational flexibility.

How apkireturn team will help in the LLP Firm Registration Process?

We believe in complete hand holding of our client, we will assign a personal manager to help you complete the entire process of company registration.

We will assist you in following areas:

Steps to be taken care of Post Incorporation of the LLP

This is a one-time activity, to be done once every year. As per Income Tax Laws ITR-6 needs to be filed by the Companies along with Tax Audit report (if applicable) to be digitally signed.

This is a one-time activity, to be done once every year. At the end of the financial year, when income tax return has been filed and ROC Audit report has been prepared, the Annual Return are required to be uploaded on the MCA portal which are required to be digitally signed by Directors and C.A. who has conducted the Audit.

Open a bank account in the name of the LLP. The Certificate of Incorporation, LLP Agreement, PAN card of the LLP and other relevant documents will be required for this.

If not applied during the incorporation process, apply for Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) for the LLP.

If the LLP is expected to have a turnover exceeding the threshold limit for GST, or if it is involved in inter-state supply, it must register for GST.

FAQs

An LLP is a business structure that combines the features of a partnership and a corporation. It offers limited liability to its partners and allows them to manage the business directly.

In an LLP, partners have limited liability, which means they are not personally responsible for business debts or negligence of other partners. This is not the case in a traditional partnership.

LLPs are ideal for professionals like lawyers, accountants, consultants, and small businesses that prefer a flexible management structure with limited liability.

Key advantages include limited liability protection, operational flexibility, no minimum capital requirement, and ease of setting up and running compared to a corporation.

In many jurisdictions, an LLP is taxed as a partnership, meaning that profits are taxed at the individual partner level and not at the entity level, avoiding double taxation.

Partners in an LLP are only liable up to the amount they have invested in the business. Personal assets are usually protected from business liabilities.

Yes, an LLP can continue its existence irrespective of changes in partners. It is a separate legal entity that is not affected by the retirement or death of partners.

An LLP is typically managed by its partners, in accordance with the terms of the LLP agreement. Partners have the freedom to decide how they will contribute to the business operations.

Yes, LLPs are required to file annual returns and financial statements, and in some cases, get their accounts audited.

Yes, in many jurisdictions, an LLP can be converted into a corporation. The process and requirements for conversion vary depending on the local regulations.

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