October 3, 2019
5 min read
This guide lays down everything on Limited Liability Partnerships (LLP) in India - the essentials, LLP registration process and documents required
Starting a new business requires choosing the right business structure that matches the needs, scale, industry and strength of the startup. Generally, entrepreneurs looking to start a business with someone opt for Partnership business structure, however, they end up with more liability and risks in a partnership than starting a business alone. However, the introduction of Limited Liability Partnerships have solved this issue and have slowly become the most preferred business registration options for entrepreneurs starting a business together.
This guide lays down everything on Limited Liability Partnerships (LLP) in India - the essentials, LLP registration process and documents required.
Limited Liability Partnership (LLP) is a hybrid business form that provides the dual benefits of limited liability of a Private Limited Company and the flexibility and freedom of a Partnership Firm. All LLPs in India are governed as per the provisions of the Limited Liability Partnership Act, 2008.
Under a Limited Liability Partnership business, the partners have limited liability and their personal assets cannot be used to pay off the debts of the business. Additionally, one partner is not responsible for the misconduct or negligence of any other partner since all the partners are liable for their own acts and have liability limited to their share only.
As per the provisions of the LLP Act, the following conditions and essentials must be fulfilled for LLP incorporation in India:
A minimum of 2 partners, with no limit to the maximum number of partners.
At least 2 partners must be appointed as the Designated Partners of the LLP.
The designated partners must be residents of India.
The LLP must have a registered office in India.
There must be a Limited Liability Partnership (LLP) Agreement laid down.
All the Designated Partners must have DPINs- Designated Partner Identification Numbers from the MCA.
The LLP must have a unique and distinct name, with a prefix of LLP at the end of its name.
When the entrepreneur is unable to follow the LLP incorporation requirements, they must consult a business consultant in India to know about all the licenses and permits required to start a new business. The following process is adhered to for registering an LLP in India.
The first step is to appoint the partners and designated partners of the Limited Liability Partnership (LLP). There must be at least 2 partners in an LLP, and there can be an unlimited number of partners.
The next step is to obtain the Digital Signature Certificate for each designated partner. DSC is required for all kinds of ROC filings and compliance requirements with the MCA.
Once the DSCs are obtained, the designated partners need to obtain their DPINs- Designated Partner Identification Number from the MCA. DPIN is obtained by filing the relevant documents and forms with the MCA attested by a CA, CS, or an Advocate.
The fourth step is to reserve the name of the LLP. After the 2018 MCA notification, the process for reserving the unique name for an LLP has been changed. Now, the LLP-RUN form is applicable, replacing the old Form-1. The LLP needs to submit 2 unique names for the business with the ROC at the Central Registration Centre.
The LLP incorporation step comes next, which includes filing the new FiLLiP form. The new form has replaced the old Form-2 for LLP registration and must be filed with the relevant documents including the LLP-RUN and DPINs of the designated partners.
One of the most important steps of LLP registration in India is laying down the LLP Agreement and submitted it with the ROC within 30 days of incorporation. Executing the LLP Agreement is mandatory and can attract penalties if not done.
An LLP Agreement is laid down between the partners of the Limited Liability Partnership and includes the terms and conditions relating to the business. An LLP Agreement must be drafted precisely and without any errors, and for this, the partners can seek guidance from a business consultant for the drafting and vetting of LLP Agreement. The LLP Agreement also includes the following key contents:
Name of the LLP
Details of the partners including Name and Address of partners and designated partners
Contribution by each partner in the LLP.
Remuneration of partners
Rights and duties of partners
Nature of the business
Rules for governing the LLP
Mode of entry and exit of partners.
ALSO READ: Different Types Of Business Structure
The following documents are needed to start an LLP in India
PAN Card of partners
ID Proof of partners such as Voter's ID, Passport, Driver's license or Aadhar card
Address proof of partners such as Voter's ID, Passport, Driver's license or Aadhar card
Photographs of Partners
Proof of registered office of LLP
DSCs of the designated partners
DPINs of the designated partners.
Registering a Limited Liability Partnership (LLP) can be tricky for first-time entrepreneurs as it involves numerous formalities and documentation requirements. Additionally, once the LLP is incorporated, the LLP Annual compliance requirements come into the picture. This makes it necessary for the business partners to seek guidance from the best business incorporation consultants in India, who can guide them about the LLP registration as well as the post-incorporation compliance requirements.
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