LLP is an abbreviation for “Limited Liability Partnership“. As a partnership firm, a partnership is a corporate business vehicle that provides its members with the benefits of a company’s limited liability while also allowing them to manage their internal management on mutually agreed-upon terms.
Partners are less liable for any debt incurred while running the business in the future. It is known as a “hybrid between a company and a partnership” because it combines elements of both a “corporate structure” and a “partnership firm structure.”
According to the terms of the LLP Agreement, the partners need to contribute to the LLP. Their share could be in the form of tangible or intangible property, movable or immovable property, money, or cash.
LLP Registration in India
LLP Registration in India has evolved into an alternative form of business that combines the comforts enjoyed by the corporation and the partnership firm into a single entity. The Limited Liability Partnership Act of 2008 established the concept of LLP in India. This one-of-a-kind hybrid is ideal for establishing small and medium-sized businesses.
It is very simple to manage and incorporate a Limited Liability Partnership in India. A minimum of two partners must register an LLP, but there is no upper limit. The LLP agreement specifies the Partners’ rights and responsibilities. Under the LLP structure, the single partner would not be held responsible for the other partner’s misconduct or negligence. The partners are responsible for all compliances and provisions outlined in the LLP agreement.
Process of LLP Registration
The LLP registration procedure is as follows:
- Obtain a Certificate of Digital Signature (DSC)
- Request a Director Identification Number (DIN)
- Acceptance of a Name
- The formation of an LLP
- Fill out the LLP Agreement
- To register an LLP, the Designated Partners must first apply for a digital signature because all documents are filed online and must be signed digitally.
- The next step is to obtain the Directors Identification Numbers of all the LLP’s directors.
- After logging into the MCA official website, two proposed LLP names can get filed for name approval, which the Central Registration Certificate will handle.
- The following documents must get annexed to the LLP’s incorporation:
- Subscriber Sheet
- PAN Card and Adhaar Card of the Partners and Designated Partner
- Proof of Registered Office and Rent Agreement or Sale Deed can be attached.
- Electricity/ Telephone Bill
- NOC of the owner of the premises is rental
- Details of LLP
How to Get a Digital Signature Certificate
Each individual who wishes to get appointed as a partner of an LLP must first apply for a Digital Signature Certificate before proceeding with the registration process. It is required because all documents for the LLP must get filed online and digitally signed. All forms filed electronically on the MCA portal must be digitally signed by a DSC.
Only government-approved certifying agencies can issue the DSC. The cost of obtaining DSC differs depending on the Certifying Authorities.
Section 24 of the Indian Information Technology Act, 2000 requires Certifying Authorities to grant a licence to issue a digital signature certificate. Examples include the National Informatics Centre, IDRBT, CDAC, NSDL, and other CAs.
The Benefits of LLP Registration in India
There are several reasons why people prefer LLP registration in India over forming a private limited company.
LLPs are thought to be more flexible and easier to set up the type of business. Entrepreneurs find it feasible to start their business because day-to-day operations are relatively simple. Let us look at certain benefits offered by the LLPs-
Low registration costs
The cost of incorporating an LLP in India is lower than that of including a public limited company or a private limited company. You can register an LLP through IndiaFilings for as little as 7899.
No requirement for a minimum contribution
There is no requirement for a minimum contribution because an LLP can get formed with the least amount of capital possible.
Absence of upper limit on the number of business owners
An LLP requires a minimum of two partners, but there is no upper limit on the number of partners. In contrast, there are restrictions on having more than 200 members in a private limited company.
There is no requirement for a mandatory audit.
Regardless of whether the company is public or private, its accounts must get audited. Nonetheless, it is not a compulsion where LLPs are concerned. Hence, it could be considered a relevant compliance advantage of the LLP. A limited liability company is only required to perform its audit in two circumstances.
- When the aggregate contribution of LLPs exceeds Rs. 25 lakhs.
- When an LLP’s annual turnover exceeds Rs. 40 lakhs.
The taxation aspect of LLP
The LLP is subject to income taxation, but the partner’s share is not. As a result, no Dividend Distribution Tax (DDT) is due.
LLP over a partnership?
The main goal of introducing LLP in India is to introduce a type of business that provides owners with limited liability and is relatively easy to manage and hassle-free. It is a different type of firm than a partnership. Here, we look at the key distinctions between an LLP and a partnership firm.
Liability is limited
Partners in an LLP are not externally liable to creditors. As a result, the partners are personally liable to the extent of their contribution to the LLP. On the other end, where partnership firms are concerned, the partners are personally liable to the creditors. As a result, entrepreneurs may refuse to be partners in the partnership firm. The partners in an LLP have limited liability protection.
The number of partners
The number of partners LLPs and partnership firms must have at least two partners, and an LLP, instead, has no upper limit on the number of partners. If the number of partners in a partnership firm falls below two for any reason, the firm will get dissolved. In the case of LLPs, if the number of partners falls below two, the sole partner can find a new partner without dissolving the LLP.
Shifting of the LLP and a partnership firm
It is comparatively easy for the LLPs to shift their registered office and operate a bank account across India. It gets registered with the Ministry of Corporate Affairs of India.
The state government controls the Registrar of Firms, who registers partnership firms. As a result, operating or moving across India with Partnership firms is more complicated.
A Limited Liability Partnership is a type of business organisation that protects individual partners from the joint liability of the other partners in the firm. They are only liable for their share because their liability is limited; it does not consider the members’ personal assets. In the same way that shareholders in a corporation have limited liability, some partners in an LLP do as well.
Furthermore, an LLP differs from a corporation in that partners in an LLP directly manage the business. In contrast, shareholders in a corporation elect a board of directors to carry out the essential tasks. LLPs are treated the same as any other partnership firm in taxation.
What exactly is DPIN?
A Designated Partner Identification Number is a one-of-a-kind identifier assigned to all existing and proposed Designated partners of an LLP. Every current or proposed Director must have a DPIN.
What is the minimum requirement of partners to form an LLP?
A Limited Liability Partnership must have at least two Partners, whereas an LLP can have an unlimited number of Partners.
How Do You Become a Partner in an LLP?
The designated Partner must be a natural person over the age of 18. The LLP Act of 2018 allows a foreign national, including a foreign company, to establish an LLP in India if at least one designated partner is Indian.
What is the lower limit of fund requirement to start a Limited Liability Partnership?
An LLP can get established with any amount of money; there is no such thing as a minimum investment. A partner can provide both tangible and intangible assets.