Overview of Limited Liability Partnership Registration in India

Following are the merits of choosing to incorporate an LLP in India:

Separate legal entity

Like corporations, LLPs are distinct legal entities. They can initiate lawsuits on behalf of the partners even though they are separate from them. In order to earn the trust of different stakeholders and inspire confidence in the firm among customers and suppliers, LLP contracts are executed in the name of the business.

Partners are only partially liable

In an LLP, each partner is only responsible for their own contributions i.e. they are only accountable for the contributions they made and are not personally liable for any losses the business suffers. The partners have no personal liabilities and therefore, they are free to conduct themselves as respectable businessmen.

Lower incorporation costs

An LLP's formation is less expensive than incorporating a public or private limited company. There are not many compliance obligations for the LLP. The LLP is only required to file Annual Returns and Solvency Statements each year.

Easy transfer of ownership

LLPs offer the advantage of easy ownership transfer, which sets them apart from other types of business entities. This is why individuals often choose to register as an LLP.

Easy handling of disputes

Individuals opting for limited liability registration enjoy the advantage of handling disputes effectively. An LLP agreement is prepared for a limited liability partnership entity just like a shareholders agreement is drafted for a private limited company. This agreement enables the smooth resolution of any disputes that may arise among partners.

Dividend Distribution Tax does not apply to LLPs

Unlike companies, where withdrawing profits incurs tax liabilities in the form of DDT @ 15% (in addition - surcharge and education cess) paid by the company, LLPs do not have such tax obligations and thus, partners in an LLP can easily withdraw profits without incurring any additional tax burden.

There is no minimum capital contribution amount

An LLP does not need a certain amount of money. The governing laws have not made it mandatory for an LLP to have a minimum paid-up capital to incorporate. Any amount of funds can be contributed by the partners.

No upper limit on number of partners

Limited liability partnerships (LLPs) only need two partners, unlike private limited companies which have a maximum limit of 200 members. There is no similar restriction on the number of partners in an LLP.

Lesser burden of compliance

LLPs have a lower compliance burden compared to other business structures. They only need to file annual returns, along with the statement of accounts and solvency.

No mandatory need for compulsory audit

Unlike private or public companies, which are required to have their accounts audited regardless of their share capital, LLPs are not obligated to undergo compulsory audits. LLPs are only required to get their accounts audited annually if their turnover exceeds Rs. Forty lacs or if their contribution is more than Rs. 25 lacs in any financial year.

What are the Eligibility Criteria for LLP in India?

The following are the essential eligibility criteria for an LLP:

Minimum number of Partners

For an LLP to be registered in India, a certain number i.e. a minimum of two partners are needed. 

Name of the entity must be distinct and not the same as any brand or company that already exists

An LLP needs to have a distinct name to incorporate and run its business without confusion with existing names and registered trademarks.

LLP Agreement

An agreement to lay down the necessary formalities and clauses is also required. It is mandatory to file LLP agreement in Form 3 online on MCA Portal within 30 days of incorporation.

One of the Partners must be an Indian citizen

An LLP must have at least one Indian national among its partners.

DPIN Number

An LLP requires that all of its partners get a Designated Partner Identification Number (DPIN).

DSCs for partners

All of the LLP's partners must obtain digital signature certificates, which makes it easier to store documents and signatures electronically and digitally.

Physical Address for the office

In addition, the office needs a real physical location to conduct regular interaction with various regulatory bodies. According to the Limited Liability Partnerships Act of 2008, this criteria must be met.

For registering LLP, the following documents are must:

Documents required of Partners

• PAN Card or ID Proof: Partners need to provide their PAN Card or any other valid ID proof, which serves as the primary identification document.
• Address Proof: Partners must submit any one of the following documents as address proof: Voter's ID, Passport, Driver's License, Aadhar card or any government-issued identity card that includes the address.
• Residence Proof: Partners are required to submit their latest bank statement, telephone bill, mobile bill or gas bill as proof of residence.
• Photograph: Partners should provide a passport-sized photograph with a white background.
• Passport (for Foreign Nationals and NRIs): In the case of foreign nationals and non-resident Indians (NRIs), a valid passport is necessary.

Documents required of LLP

• Proof of Registered Office Address: The proof of registered office address must be submitted during the registration process or within thirty days of incorporation. A leasing agreement or No Objection Certificate is required in case that the registered office is rented.
• Digital Signature Certificate (DSC): A DSC allows for the digital signing of all documents and applications by the authorised signatory, which makes it sine qua non for the process.[MOU1]  

What is the Cost of Registration for LLP?

The costs of incorporation for a Limited Liability Partnership depends on the capital contribution made. As per Ministry of Corporate Affairs (MCA), the following fee slabs are given:

• Rs. 500/- for the incorporation of a limited liability partnership with a capital contribution which is less than Rs. 1 lakh.
• Rs. 2000/- is needed for the incorporation of an LLP with a capital contribution of more than Rs. 1 lakh but less than Rs. 5 lakhs
• Further, Rs. 4000/-  is necessary for the incorporation of an LLP with a capital contribution that exceeds Rs. 5 lakhs but does not exceed Rs. 10 lakhs
• Rs. 5000/- is needed for the incorporation of an LLP with a capital contribution of more than RS. 10 lakh.

For registering an LLP in India, the following steps must be followed:

Making an Application for LLP registration

An application i.e. FiLLiP (Form for incorporation of Limited Liability Partnership) must be submitted by partners to the concerned Registrar for the LLP to be registered.

Obtaining DPIN and DSC

The partners must submit an application for a digital signature certificate in the next stage. This certificate will enable the LLP's partners to sign papers both electronically and digitally.  Signatures using DSC are required by at least one partner. The partners must then obtain a unique identification number for the partnership. All partners in the partnership must have DPINs. You can do this by submitting form DIR-3.

Verification of Partnership Name

The LLP RUN form can be used to verify name of the partnership. Once the partnership's name has been reserved, it can be used for 90 days. The name will no longer be reserved after this time frame. Any provisions of current trademark or copyright laws must not be violated by the name as also it must not be objectionable in addition. For the partnership, a minimum of two names may be held in reserve.

Submitting the Documents

All of the partners must submit the necessary documentation for the partnership to the RoC after the name has been reserved. These papers would consist of incorporation papers as well as passports and other forms of personal identity like PAN cards and Aadhaar cards.

Drafting LLP Agreement

The LLP agreement must be carefully written. The limited liability partnership's partners' obligations and liabilities will be outlined in this agreement. Any partner or person who wants to register a limited liability partnership will need particular guidance while preparing the contract. Using professional services from StartupFino would be appropriate for preparing your LLP agreement. The LLP agreement must be filed with the ROC or through the MCA site within 30 days after being written. Form 3 must be used to accomplish this.

Obtaining the Certificate of Incorporation

The RoC will then check and verify the application after it is submitted with all required documentation before issuing the Certificate of Incorporation as the final step.

In line with the requirements under the statute, all LLPs need to file certain statutory filings with the government each year, which are:

Books of Account

All LLPs are required to keep accurate books of account pertaining to their business transactions, to be maintained at the registered office, using the double entry method of accounting.

The accounts of LLPs that have a capital of more than Rs. 25 lakhs or a turnover of more than Rs. 40 lakhs must be audited by a CA.

A punishment of not less than Rs 25,000 and not more than Rs 5,00,000 may be imposed on any LLP that violates the provisions under the Act. Also, if the chosen partner may be fined between Rs. 10,000 and Rs. 1,000,000.

Annual Return Filing

Each financial year, an LLP must submit two different MCA annual returns, namely Forms 8 and 11.

Form 8

Within 30 days of the close of the first 6 months of the fiscal year, Form 8 and the required fee must be filed. This needs to be confirmed by a chartered accountant, company secretary or cost accountant and it needs to be digitally signed by two chosen partners.

If this form is not submitted, a fine of Rs. 100 will be assessed daily until it is completed.

Form 11

The details regarding the number of partners, total contribution received by all partners and a summary of partners are all included in Form 11. Within 60 days of the end of the fiscal year i.e. withing 30^th May of every year, all LLPs are required to submit this form along with the required filing fee.

Until all yearly returns are submitted, an LLP cannot be dissolved or disbanded. Therefore, in order to avoid a fine, it is crucial to submit your LLP Annual Return on time or earlier.

Income Tax Return Filing

Regardless of sales or profits, all LLPs registered in India must file an IT return each year. Therefore, even a dormant LLP that hasn't engaged in any transactions is required to file an income tax return.

Maintenance of Documents

All LLPs must have on file their articles of incorporation, a list of all partners and any changes to those partners, documentation of fee payments, statements of account and solvency and yearly returns submitted by the LLP with the Registrar at their registered office. The aforementioned records should be easily accessible for review upon request from the relevant authorities.

What are the Recent Changes Made to Limited Liability Partnerships?

A few important changes have been made through the LLP (2nd Amendment) Rule, 2022, which are as follows:

• At the time of incorporation, there may be 5 Designated Partners rather than 2 (without a DIN).
• All LLP forms are currently available online.
• LLPs will receive their PAN and TAN along with the Certificate of Incorporation.
• The LLP's interim resolution professional will now sign the Statement of Account and Solvency on its behalf.
• A web-based Form 9 will be made available for submitting Consent of Partners.

LLPs have gained much popularity since they were introduced in 2008. While forming an LLP, you need at least two partners and there is no maximum limit on the number of members, unlike with a company.

Startupfino is a company that specialises in offering complete services for LLPs. We can help you with everything from providing advice in the initial phase to ensuring that you meet all the necessary requirements and keeping your LLP in good legal standing.

Our LLP services include the following:

• LLP name reservation services
• Drafting LLP agreements in compliance with applicable laws
• Annual accounts and return filing services with the Registrar of Companies
• LLP taxation and accounting services
• Arrangement and reconstruction of LLP firms.

In addition to fulfilling the formalities mentioned above, Startupfino also offers pre-establishment and post-establishment Limited Liability Partnership services.

By availing our services, entrepreneurs can avoid the negative outcomes of non-followance of rules and compliances. StartupFino works hard to provide services that are prompt and effective, so you can manage your business without any issues and without facing penalties or problems.