Limited Liability Partnership (LLP) Registration in India
In 2009, the business form limited liability partnership was introduced in India following the Limited Liability Partnership Act of 2008. To simply put it, this business structure refers to the combination of a partnership and a limited company, which can be very advantageous in certain setups.
It is only but necessary to know the concepts surrounding this business form, especially if you are considering having a limited liability partnership (LLP) registration in India. Apart from these, business owners should know what the documentary requirements and other prerequisites are involving limited liability partnership (LLP) registration in India.
Setting up a business is a big task. If you need help, do not hesitate to reach out to 3E Accounting. Our team is ready to help you.
Mandatory Compliances for a Limited Liability Partnership in India
A Limited Liability Partnership (LLP) in India needs to follow specific compliance procedures under the law to avoid paying fines or undergo other consequences. LLP is also a business structure that combines the advantages of a partnership, along with the limited liability of a company. In such an entity, either some or all the partners have limited liability.
What is a Limited Liability Partnership?
While this form of business structure has been in India for over a decade now, limited liability partnership has become common as well in the United Kingdom, New Zealand, and South Africa.
As mentioned, a limited liability partnership is deemed a special business form as it incorporates both traditional partnerships with the perks of the limited liability principle. This makes limited liability partnership (LLP) registration in India a very viable choice for business owners seeking more flexibility in terms of business structures.
Now, the question is: which industries or businesses are usually going for limited liability partnership (LLP) registration in India? These include the following:
- Law firms
- Accounting firms
- Private equity firms
- Architecture firms
- Real estate firms
- Venture capitalists
Apart from the benefits of limited liability, many industry players prefer limited liability partnerships because of ease of compliance and conducting business.
Who Should Form a Limited Liability Partnership in India?
This business format is suitable for small and medium-sized firms, especially service sector companies. It is ideal for firms, which carry activities that involve professionals.
Advantages of Limited Liability Partnership (LLP) Registration in India
Businesses opt to have a limited liability partnership (LLP) registration in India for a number of reasons, all of which point to benefitting the operations and the owners themselves. Let us discuss each of them.
Limited Liability
Limited liability partnership allows member partners to be only liable or responsible for their own acts in the business, akin to the limited liability of shareholders in a limited company. The partnership, which is a separate legal entity, is only responsible as well for its own debts. Should it file for bankruptcy, the limited liability partnership may not be able to go against the personal assets of its directors—a safeguard that most if not all business owners prefer. Long story short, business owners are only liable for the amount they invested in the limited liability partnership.
Fewer Requirements to Set Up
In a limited liability partnership, a person can set it up with just two partners, but one should be an Indian resident. In addition, the government does not specify a certain amount of capital requirement should you want to incorporate the partnership.
Ease in Transferring Shares
Limited liability partnerships allow the member partners to easily transfer their shares to another person. To do this, the recipient should be inducted as a designated partner of the partnership first. It gives the partners to bow out from the firm anytime they want.
Existence is Going Concerned
Theoretically speaking, a limited liability partnership has the so-called perpetual succession. This means it only ceases to exist when it has been dissolved by the partners themselves. The partnership may continue to exist despite the entry and exit of the partners.
Asset Ownership
In the eyes of the law, a limited liability partnership is a legal entity. This means it can buy, own, and even sell its properties. As long as the partnership is going concerned, no other parties can claim ownership of its assets.
Key Benefits Available to a Limited Liability Partnership in India
- Members have lesser liabilities to debts that may arise while running the company. The members’ personal assets have protection from business liabilities.
- A partner is not responsible for another partner’s mistake or carelessness.
- The members of an LLP get the flexibility peculiar to a partnership company in managing the business.
- An LLP is a legal entity that can identify from its members. It can enter into contracts, own, buy, rent, or lease property, or employ staff. Legal action can also be taken against it if needed.
Eligibility for Limited Liability Partnership (LLP) Registration in India
Now that you know what a limited liability partnership is, in addition to its perks, let us now discuss the eligibility aspect when registering your partnership. Here are the following requirements you have to keep in mind when setting up your limited liability partnership in India. Take note of everything to avoid potential problems along the way.
- Number of Partners. The minimum number of partners in a limited liability partnership is two, and one of them should be an Indian citizen. A company can also be considered as a partner of the partnership.
- Identity and Signature. The limited liability partnership’s member partners should have a designated partnership identity number each. In addition, it is also mandatory for them to have a digital signature certificate, which is used to file documents and signatures digitally.
- Official Workplace. The regulations dictate that the limited liability partnership should have an official and actual physical place where it can operate daily. This mandate is supported by the Limited Liability Partnership Act of 2008.
Procedure for Registration of a Limited Liability Partnership in India
- You need to register on the website of MCA (Ministry of Corporate Affairs), mainly made for LLP services. You can click on the ‘Register’ tab on the page.
- Fill the registration form. Those fields marked with a ‘*’ must be filled compulsorily. It would be best to have a user name and a password.
- Next, upload the digital signature certificate.
- The system also gives you a message after a successful registration.
Limited Liability Partnership in India Must Follow Regulatory Compliances
- File the Annual return with the MCA: Form-11 is prescribed for the annual return filing of LLPs which includes the details of the partners of the LLP. It must also contain details about changes in the firm’s partners for the benefit of the MCA. The form must be filed on the 30th of May within 60 days of 31st March, which is the financial year-end.
- Filing the Statement of Account and insolvency: An LLP has to maintain proper statements and all essential books of accounts. Form 8, with all the account details required, has to be filed with the Registrar of companies. Also, for those LLPs whose turnover exceeds Rs. Fifty lakhs or contribution exceeds Rs. 25 lakhs, it is mandatory to get a statutory audit. The last date of filing the form with MCA is 30th October.
The LLP has to file the above forms with the MCA even if it has not commenced business and not carried out a single transaction.
- Filing the Income Tax Returns: The income tax returns have to submit by LLPs after the end of every financial year.
Prescribed dates for filing the returns:
- 31st July, for those LLPs whose audit is not a requirement.
- 30th September, for LLPs who require an audit as per the law.
- DIN holders should file DIR-3 KYC if they do not hold the position of a director or designated partner in an LLP or company.
- File E form DIR-3 KYC for the first time.
- File DIR-3 KYC WEB for further filing.
Usually, 30th September of the next immediate financial year is the last date for filing the DIN form.
The LLP Act 2008 stipulates that all the steps mentioned above are mandatory for LLPs. Then, non-compliance would result in heavy penalties for the Limited Liability partnership daily. 3E Accounting is backed by years of valuable experience and provides essential assistance for business compliance to LLPs and helps them avoid penalties and other legal actions. If you are looking to set up a limited liability partnership in India, then feel free to get in touch with our team and we will be more than happy to support you.
Required Documents and Forms for Registration of the Limited Liability Partnership
For limited liability partnership (LLP) registration in India, here are the documents needed to be prepared by the partners:
- Address of the partners
- Partners’ proof of resident
- Photo
- Passport, for foreign nationals
- Permanent account number card or proof of ID
For the part of the limited liability partnership itself, the following is required:
- Digital signature certificate
- Proof of office address
Meanwhile, here are the forms to be filled out related to the establishment of a limited liability partnership
- Form 5 for Change of Name of the entity
- Form 17 for Conversion of a firm to a limited liability partnership
- Form 18 for Conversion of a public limited company to a limited liability partnership
Procedures: Limited Liability Partnership (LLP) Registration in India
For your limited liability partnership (LLP) registration in India, there are steps you have to follow. Let this article guide you. Below is the list of procedures for the registration.
Securing the Digital Signature Certificate
When filing online forms and applications with the Ministry of Corporate Affairs, the documents must be digitally signed by the partners of the limited liability partnership. The designated partners, with this, should be able to obtain the digital signature certificate, which has a validity of two years. This is associated with the permanent account number card of the partnership’s application. In addition, you also have to secure the digital partnership identity number.
Securing Business Name Approval
The name of your partnership is something that you have to think of. But beyond this, you have to secure approval from the regulators so you can use the name. When applying, you may list down a maximum of 2 names you preferred for your business, which the Ministry of Corporate Affairs will evaluate. If the regulator rejected both names, you may be able to resubmit but only for one time. Your preferred name will be reserved for 90 days from the date of approval.
Submitting Documents to Regulator
The Registrar of Companies, following the approval of the partnership name, will compel the partners to submit the required documents as part of the application. The applicants may be asked to file for additional documents or information, depending on the assessment of the registrar, and it can be done within 15 days of notice.
Finalizing the Partnership Agreement
This is deemed the most crucial aspect of establishing a limited liability partnership. When drafting the partnership agreement, all the partners should be very careful and concise so as to avoid future concerns with the drafting of the terms. First of all, it should contain the name, place of business, business objectives, and other related information about the limited liability partnership. At the same time, the agreement should provide details of the following:
- Amount of capitalization
- The profit-sharing ratio among partners
- Rights and duties of each partner
The agreement should be executed—through stamp duty payment—once all the partners reviewed and accepted all the terms and tenors stated in it. When the agreement gets notarized, it should be signed by the partners of the business in the presence of two witnesses. The finalized agreement must be submitted to the Ministry of Corporate Affairs within 30 days of incorporation. Failing to meet the deadline means payment of a penalty fee.
Obtaining Certificate of Registration
Following all the steps mentioned earlier, the partnership will then apply and receive its registration certificate, which proves the legality of its existence.
Other Necessary Steps for Setting Up Limited Liability Partnership
After completing the limited liability partnership (LLP) registration in India, you should open a bank account for your business. It will be the official bank account of the partnership used for different transactions. In addition, you also have to secure your tax deduction or collection account number for tax purposes.
Incorporation of Limited Liability Partnership
By definition, incorporation refers to the process of forming a business entity following specific regulations. This legal process effectively makes the business a separate entity from its owners.
After you have reserved the business name with the regulator, you then need to fill up Form-2 “Incorporation Document and Statement,” which can be done via online portals. Following this, you should settle the registration fee based on the schedule of payments.
The designated partner and an accountant should digitally sign the incorporation document accomplished online. The said partner should have a permanent digital partnership identity number while the accountant should be in practice and have participated in setting up the limited liability partnership.
Submit to the Registrar all the documents once you have completed them all as part of the compliance. It will be reviewed before issuing you a certificate of incorporation. You can be able to check the status of your application via online portals.
Choosing the Right Business Name
When you are considering limited liability partnership (LLP) registration in India, or any business form for the matter, picking the right name that the partnership will carry on moving forward is a must. You should take your time in choosing the name as this will represent your partnership for a long time ideally. With this, here are some of the tips that might help you with this task:
- The name of your limited liability partnership should be related to your business so the customers or clients will be able to have better recall. It should also describe the nature of your business so as not to misrepresent the partnership.
- Keep the partnership name short and simple. Again, you do not want it to be confusing that it cannot be remembered instantly by anyone at all.
- The name should not sound like any other existing entity and trademark. You do not want to dilute your name even before you start operations. In addition, you would not want to be facing potential lawsuits.
- The name should not be offensive or illegal. You will waste your time seeking name approval if it contains words that are inappropriate. Stay away from crass terms immediately.
- Do not use words that are too abstract and generic. The regulator will deny your approval right away upon checking.
- These are just some of the tips you can use when picking the name for your partnership. It would also help to do some research first when applying for a business name to save you the time of having to resubmit an application.
Cost of Registration and Incorporation
In limited liability partnership (LLP) registration in India, you also have to account for all the costs involved in the process. After all, before you make money, you have to spend money first. So, when crafting an investment budget, consider the following as well.
- Digital signature certificates usually cost around Rs. 1,500 to Rs. 2,000 for two partners. The costs vary on which agency issues them.
- Expenses for director identification number can reach Rs. 1,000 for two partners.
- To reserve a name, you have to pay Rs. 200.
- There is a fee related to incorporation and partnership agreement which depends on capital contribution.
With the list given, hopefully, you can come up with a budget that will cover everything when setting up your business.
How Much Time Involved in Registration?
It may take you approximately 15 days to register your limited liability partnership. Of course, this depends on the availability of all the documents needed for the application. Indeed, preparation is key to make sure that the whole process will go smoothly and according to plan. As a tip, make a list of everything that should be done to not forget anything.
As discussed, there are many things to be considered for limited liability partnership (LLP) registration in India. A corporate service provider can help you with all of these. Reach out to 3E Accounting today. We are a team of excellent business experts that can guide you every step of the way.
