Intellectual Property Rights
Limited Liability Partnership (LLP) Registration
Limited Liability Partnership (LLP) has become a preferred form of organization among entrepreneurs as it incorporates the benefits of both partnership firm and company into a single form of organisation.Among the partners, there should be a minimum of two designated partners who shall be individuals, and at least one of them should be resident in India. The rights and duties of designated partners are governed by the LLP agreement. They are directly responsible for the compliance of all the provisions of the LLP Act, 2008 and provisions specified in the LLP agreement.
The concept of the Limited Liability Partnership (LLP) was introduced in India in 2008. An LLP has the characteristics of both the partnership firm and company. The Limited liability Partnership Act, 2008 regulates the LLP in India. Minimum two partners are required to incorporate an LLP. However, there is no upper limit on the maximum number of partners of an LLP.
Among the partners, there should be a minimum of two designated partners who shall be individuals, and at least one of them should be resident in India. The rights and duties of designated partners are governed by the LLP agreement. They are directly responsible for the compliance of all the provisions of the LLP Act, 2008 and provisions specified in the LLP agreement.
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Registering your firm as a Limited liability partnership involves lesser compliance formality as compared to a PLC registration.
It Usually takes 15 to 20 working days.
- Filing of E-forms
- Drafting of LLP Deed
- Designated Partner Identification Numbers - DPINs (2 nos.)
- Digital Signature Certificates - DSC's (2 nos.)
- Issue of Incorporation Certificate
- Includes Government Fees upto Rs. 1 Lakh Capital Contribution by Designated Partners
- Stamp Duty upto Rs. 2000/- and its Notarisation in any state in India for LLP Deed
- Assistance in Opening Bank Account
- Minimum two Partners or Stakeholders
- Companies, body corporates or already existing partnerships
- LLPs registered outside India
- Startups and SMEs looking for carrying business with minimal legal formalities
- Purchase of Plan
- Name Reservation
- Filing of LLP and DPIN application with Registrar
- Receipt of Registration Certificate
- Notarisation of LLP Deed
- Application for PAN and TAN
Name, Contact Number and Email Id of all the Stakeholders.
Directors Identification Number, if already.
Self Attested PAN, Aadhar & Passport size photo of all the Stakeholders.
Apostilled Passport, Mobile Bill and other KYC docs in case of NRI Stakeholder.
Specimen Signatures of all Stakeholders.
Few Proposed Business Names along with Objects.
Latest Electricity Bill/Landline Bill of Registered Office.
NOC from owner of registered office. (If Owned)
Rent Agreement from Landlord. (If Rented/Leased)
Brief description of main business activities of the proposed Company.
Shareholding pattern (50:50 or 60:40) between the Stakeholders.
Total Capital Contribution of the Company.
Characteristics of a Limited Liability Partnership
1. LLP is governed by the Limited Liability Partnership Act 2008, which has come into force with effect from April 1, 2009. The Indian Partnership Act, 1932 is not applicable to LLP.
2. LLP is a body incorporate and a legal entity separate from its partners having perpetual succession, can own assets in its name, sue and be sued.
3. The partners have the right to manage the business directly, unlike corporate shareholders.
4. One partner is not responsible or liable for another partner’s, misconduct or negligence.
5. Minimum of 2 partners and no maximum limit.
6. Should be ‘for profit’ business.
7. The rights and duties of partners in an LLP, will be governed by the agreement between partners and the partners have the flexibility to devise the agreement as per their choice. The duties and obligations of Designated Partners shall be as provided in the law.
8. Limited liability of the partners to the extent of their contributions in the LLP. No exposure of personal assets of the partner, except in cases of fraud.
9. LLP shall maintain annual accounts. However, audit of the accounts is required only if the contribution exceeds Rs. 25 lakh or annual turnover exceeds Rs. 40 lakh. A statement of accounts and solvency shall be filed by every LLP with the Registrar of Companies (ROC) every year.
Formulation of a Limited Liability Partnership
|Form name||Purpose of the form|
|RUN – LLP (Reserve Unique Name-Limited Liability Partnership||Form for reserving a name for the LLP|
|FiLLiP||Form for incorporation of LLP|
|Form 5||Notice for change of name|
|Form 17||Application and statement for the conversion of a firm into LLP|
|Form 18||Application and Statement for conversion of a private company/unlisted public company into LLP|
For forming an LLP, some of the important steps and matters are given below:
There should be at least 2 persons (natural or artificial) to form an LLP. In case any Body Corporate is a partner, then he will be required to nominate any person (natural) as its nominee for the purpose of the LLP. Following entities and/or persons can become a partner in the LLP:
(a) Company incorporated in and outside India
(b) LLP incorporated in and outside India
(c) Individuals resident in and outside India.
Designated Partner Identification Number (DPIN)
Digital Signature Certificates
Name for LLP
Compliances for a LLP after Incorporation
The partnership has been the most desirable form of business for ages. However, just by adding a prefix, i.e. 'Limited Liability', A new form of business is created: LIMITED LIABILITY PARTNERSHIP. The ulterior motive for constituting this form of business is to cop up with the drawbacks of partnership and commemorate the company's stringent requirements.
So, a Limited liability partnership is a form of entity that entails features of a partnership firm and a company. Its partners manage the LLP, and it is a separate legal entity from its partners.
The incorporation process of LLP is simple, and it does not require many compliance formalities. Hence, LLPs is a top choice by Professionals, Micro and Small or closely-held businesses.
Limited Liability Partnership has been coined by way of enforcing the Limited Liability Act, 2008.
Do I need to file Form-8 if no business has started yet? Do I need to file Form-11 if no transaction is there for an entire year?
Yes, just for the sake of the active status of the LLP. You must file these forms even if your business has not started or no transaction has taken place in the entire year so that MCA is updated with the state of affairs of LLP.
I have not Filed Form-8 and Form-11, Is there any chance ROC can waive my penalty?
Yes, recently, on March 04th 2020, LLP settlement Scheme, 2020 has been launched vide circular 6/2020 under which Form-8 and form-11 can be filed without payment of late fees.
MAINTENANCE OF BOOKS OF ACCOUNTS AND DOCUMENTS
All LLPs are required to maintain their books of accounts on a cash basis or accrual basis. Books of accounts such as Balance sheets, P&L Accounts are to be kept in the registered office of the LLP for the specified period. Director must also keep other relevant documents at the registered office such as Incorporation document, names of partners and changes made, proof of fee payment, statement of account & solvency & annual return filed by LLP should also be kept at its registered office.
FILING OF INCOME TAX RETURNS
Every LLP has to file an income tax return for every year. Since LLP is a separate legal entity, along with partners' income tax returns, you have to file LLP's income tax return within the due date.
What are the requirements for an LLP Audit?
👉 All LLP with turnover less than 40 lakh rupees in each financial year or contribution less than 25 lakh rupees is not required to get its accounts audited.
👉 Where partners do not decide for audit shall include in Accounts Statement & Solvency statement by the partners. Partners acknowledgement for responsibility for complying with the Act's requirements and the Rules concerning the preparation of books of accounts is a must. A certificate shall also be issued in the specified form in FORM 8.
👉 Only a Chartered Accountant in Practice can do the audit of LLP.
👉 Partners must appoint an auditor for each financial year of the LLP for auditing its account.
Q. What are the main benefits of a Limited Liability Partnership?
👉 Partners of an LLP are an entirely separate legal entity.
👉 LLP can raise funds from other sources such as Partners, Financial Institutions, etc.
👉 It's easy to incorporate, maintain, and dissolve an LLP.
👉 LLP's assets and liabilities are separate.
👉 LLP can easily change its ownership.
Registrar of Companies, Ministry of Corporate Affairs regulate LLP. All LLPs must endure compliance and file specific statutory filing annually. It is mandatory to file an annual return not linked to Profits or Turnover. Three compulsory compliance concerning LLP are:
1. Filing of Annual Return
2. Form -8
3. Form -11
4. Maintenance of Books of Account
5. Filing of Income Tax Returns
What is form 8? What Consists of Form-8?
Form-8 consists of the Statement of income and expenditure and Account and Solvency. Form-8 also contains a statement of assets and liabilities.
What is the Due date for form8 filing?
It is filed within a month from the end of the financial year. i.e. by 30th October.
Who will be signing the form8?
All Designated partners must Digitally sign the form. In addition, certification by a chartered accountant is a must.
How many parts are there in this form?
There are two parts to Form 8. They are:
👉 Part A – Solvency Statement
👉 Part B – Accounts Statement, Statement of Income & Expenditure
What consists of Form 11?
Form -11 consists of an annual return. It also contains partner details and the contribution made by them for L.L.P.
What is the Due date of Form-11?
The due date for Form-11 filing is within two months of the end of the financial year. i.e. before 30th May.
Who shall sign the form?
Any one of the Designated Partners of the L.L.P. can sign the form. In case the total obligation of the contribution of partners of the L.L.P. exceeds Rs. Fifty lakhs or turnover of L.L.P. exceeds Rs. 5 crores, then L.L.P. Form 11 need certification from a C.S. (Company Secretary) holding C.O.P.
What are the documents required for Filing L.L.P. Form 11?
Following documents are required:
👉 Total obligation of the contribution of all partners
👉 Total contribution received by all the partners of the L.L.P.
👉 Summary of Designated Partners.
👉 Further, details of L.L.P. and the company in which partner/ designated partner is a director/ partner is attached to the form.
Difference between a Company, Partnership Firm and an LLP
|Registration||Compulsory registration with the ROC. Certificate of Incorporation is conclusive evidence.||Not compulsory. Unregistered Partnership Firm won’t have the ability to sue.||Compulsory registration required with the ROC|
|Name||At the end of the name word “limited” of the name of a public company, and “private limited” with a private company.||No guidelines.||Name to end with “LLP” Limited Liability Partnership”|
|Capital contribution||Private company should have a minimum paid up capital of lakh and Rs. 5 lakhs for a public company||Not specified||Not specified|
|Legal entity||A separate legal entity||Not a separate legal entity||A separate legal entity|
|Liability||Limited to the extent of unpaid capital.||Unlimited, can extend to the personal assets of the partners||Limited to the extent of the contribution to the LLP.|
|No. of shareholders / Partners||Minimum of 2. In a private company, maximum of 50 shareholders||2- 20 partners||Minimum of 2. No maximum.|
|Foreign Nationals as shareholder / Partner||Foreign nationals can be shareholders.||Foreign nationals cannot form partnership firm.||Foreign nationals can be partners.|
|Meetings||Quarterly Board of Directors meeting, annual shareholding meeting is mandatory||Not required||Not required.|
|Annual Return||Annual Accounts and Annual Return to be filed with ROC||No returns to be filed with the Registrar of Firms||Annual statement of accounts and solvency & Annual Return has to be filed with ROC|
|Audit||Compulsory, irrespective of share capital and turnover||Compulsory||Required, if the contribution is above ? 25 lakhs or if annual turnover is above ? 40 lakhs.|
|How do the bankers view||High creditworthiness, due to stringent compliances and disclosures required||Creditworthiness depends on goodwill and credit worthiness of the partners||Perception is higher compared to that of a partnership but lesser than a company.|
|Dissolution||Very procedural. Voluntary or by Order of National Company Law Tribunal||By agreement of the partners, insolvency or by Court Order||Less procedural compared to company. Voluntary or by Order of National Company Law Tribunal|
|Whistle blowing||No such provision||No such provision||Protection provided to employees and partners who provide useful information during the investigation process.|
Advantages of a Limited Liability Partnership
The first LLP was registered on 2nd April, 2009 and till 25th April, 2011, 4580 LLPs were registered. This form of Organisation offers the following benefits:
1. The process of formation is very simple as compared to Companies and does not involve much formality. Moreover, in terms of cost, the minimum fee of incorporation is as low as f 800 and maximum is f 5600.
2. Just like a Company, LLP is also body corporate, which means it has its own existence as compared to partnership. LLP and its Partners are distinct entities in the eyes of law. LLP is known by its own name and not the name of its partners.
3. An LLP exists as a separate legal entity different from the lives of its partners. Both LLP and persons, who own it, are separate entities and both function separately. Liability for repayment of debts and lawsuits incurred by the LLP lies on it and not different from the lives of its partners, the owner. Any business with potential for lawsuits should consider LLP form of organisation and it will offer an added layer of protection.
5. LLP Act 2008 gives an LLP flexibility to manage its own affairs. Partners can decide the way they want to run and manage the LLP, as per the form of LLP Agreement. The LLP Act does not regulate the LLP to large extent rather than allows partners the liberty to manage it as per their agreement.
6. It is easy to join or leave the LLP or otherwise it is easier to transfer the ownership in accordance with the terms of the LLP Agreement.
7. An LLP, as legal entity, is capable of owning its Separate Property and funds. The LLP is the real person in which all the property is vested and by which it is controlled, managed and disposed off. The property of LLP is not the property of its partners. Therefore, partners cannot make any claim on the property in case of any dispute among themselves.
8. Another main benefit of incorporation is the taxation of a LLP. LLP is taxed at a lower rate as compared to Company. Moreover, LLP is also not subject to Dividend Distribution Tax as compared to company, so there will not be any tax while you distribute profit to your partners.
9. Financing a small business like sole proprietorship or partnership can be difficult at times. An LLP being a regulated entity like company can attract finance from Private Equity Investors, financial institutions etc.
11. Under LLP, only in case of business, where the annual turnover/contribution exceeds Rs. 40 lakh Rs. 25 lakh are required to get their accounts audited annually by a chartered accountant. Thus, there is no mandatory audit requirement.
12. In LLP, Partners, unlike partnership, are not agents of the partners and therefore they are not liable for the individual act of other partners, which protects the interest of individual partners.
13. As compared to a private company, the numbers of compliances are on a lesser side in case of LLP.
Disadvantages of a Limited Liability Partnership
The major Disadvantages of Limited Liability Partnership are listed below:
1. An LLP cannot raise funds from Public.
2. Any act of the partner without the other may bind the LLP.
3. Under some cases, liability may extend to personal assets of partners.
4. No separation of Management from owners.
5. LLP might not be a choice due to certain extraneous reasons. For example,, Department of Telecom (DOT) would approve the application for a leased line only for a company. Friends and relatives (Angel investors), and venture capitalists (VC) would be comfortable investing in a company.
6. The framework for incorporating a LLP is in place but currently registrations are centralized at Delhi.
The mentioned requirements are to be compulsory followed irrespective of transactions volume or turnover. LLP has to bear the burden of multiple compliance to avoid the liability arising from fines and penalties. But is it only for avoiding penalties? The answer is no. Since LLP has to comply with way fewer compliance than the private limited company, it's better to file the necessary forms and returns before the due date to escape hefty penalties with timely annual LLP compliance filing.
Q. What is an LLP?
LLP stands for "Limited Liability Partnership" Firm/Company
A Limited Liability Partnership firm (LLP) is a hybrid structure between a partnership firm & a private limited company where the business is carried out in a corporate framework, guided by the mutually adopted partnership deed.
Q. What is the minimum capital requirement for LLPs?
There is no minimum capital contribution requirement. It can be registered even with Rs. 100 as a total capital contribution.
Q. Is stamp duty payable during incorporation process?
Yes, Stamp duty is charged by the state of registered office.
Yes, The state charges the Stamp duty where the registered office is located. The charges are on Partnership Deed & Other Forms filed in the process.
Q. What is the audit requirement for LLP?
The audit is needed when your business has started flourishing.
👉 Accounts of an LLP must be audited when the turnover is Rs. 40 lakh or more or when the total capital contribution is Rs. 25 lakh or more.
👉 The auditor of an LLP is appointed annually by the designated partners.
👉 The first auditor is appointed before the end of the financial year. The auditors' subsequent appointment or reappointment is made one month before the closing of the financial year by the designated partners.
Q. What is the stamp duty payable for LLP incorporation?
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👉 Usually, the Stamp Duty is charged at a certain percentage of Capital Contribution that varies from state to state. Therefore our expert shall guide you on this once you proceed with the plan.
Apart from this, notary charges will apply for two director affidavits and related stamp duty.
Q. What are the advantages of registering as a LLP over general partnership firms?
An LLP has certain advantages over ordinary partnership firms.
👉 Liability- In a general partnership firm, partners are personally liable for debts of the business which means that debtors may even use their personal property to settle the firm’s debts. At the same time, the liability of partners is limited in the case of an LLP.
👉 Immunity against wrongdoings of other partners- Under the LLP structure, partners are not responsible for negligence or misconduct of different partners, whereas, in general, partnership firms partners can be held accountable.
Our experts shall guide you on getting registered under the Startup India Initiative and avail the benefits.
Q. Does the Income Tax Act treat partnership firms and LLPs differently?
Not much except a few things such as
👉 Both general partnerships and LLPs are subject to taxation at a 30% flat rate.
👉Most of the other income tax act provisions apply similarly except that partnership firms are covered under a presumptive taxation scheme, i.e. if turnover is below Rs. 2 crores in business or Rs—50 lakh in case of the profession.
👉Partnership firms need not maintain books of accounts or get accounts audited, whereas LLPs are explicitly not covered.
Q. Can an NRI also become a partner in LLP? And what additional documents will be required to be submitted?
Yes, an NRI or foreigner can be a director in a Limited Liability Partnership firm. But such a person can be taken as a director only when one director is a Resident of India. Additional documents required:
👉 Identity Proof - Copy of Passport Copy (Appostiled by Consulate of Indian Embassy or Foreign Public Notary)
👉 Address Proof - Copy of Driving License or Business Visa
👉 Bank Statement or Electricity Bills copy or Any Property Tax Payment Receipt attested by Consulate of Indian Embassy or Foreign Public Notary.
RBI approval is required for foreign capital contribution. Therefore, additional charges will be applicable for RBI approval. Our experts will advise you on the applicable charges.