The Limited Liability Partnership registration framework has gained immense interest amongst entrepreneurs seeking to jointly undertake business activities with limited regulatory issues. Blending the advantage of limited liability for partners along with operational flexibility, LLPs offer an alternative to traditional partnership firms and private limited outfits. In this blog, we shall explore the procedure, benefits and requirements for LLP registration online in India.
Features of LLP
A Limited Liability Partnership is a unique business structure that has both the aspects of partnerships and companies into a single organisational form. Registration of LLP is granted by the Registrar of Companies. LLPs have many distinctive features:
· Separate Legal Entity –
An LLP is recognised as an independent judicial person, capable of entering into contracts, holding assets and suing or being sued in its own legal name. This brings to them even more credibility compared to sole proprietorships.
· Minimum Two Partners –
While companies mandate minimum seven members, LLPs require only two partners, making the structure more accessible for budding entrepreneurs and also startups. Partners share management responsibilities.
· Designated Partners –
LLPs must appoint designated partners who take responsibility for legal and regulatory compliances. At least one designated partner must be a resident Indian.
· Limited Liability –
The liability of the partners is limited to their agreed capital contribution. Outside of this, personal assets of partners are protected from business obligations and debts.
· Flexibility and Compliance –
LLPs offer a good amount of flexibility in terms of internal structure and ownership changes. They also have lower compliance burdens relative to private limited companies.
· No Minimum Capital Requirement –
No minimum capital contribution is specified for LLP formation, enhancing affordability and promoting wider adoption across businesses of all scales.
Advantages of LLP
The key advantages of a Limited Liability Partnership are:
· Limited Liability Protection –
Partners enjoy protection of personal assets as liability is limited to individual capital contributions. This reduces financial risk for entrepreneurs.
· Separate Legal Entity –
As an independent judicial person, the LLP can do its transactions freely in its own legal capacity.
· Flexibility in Structure –
LLPs allow for flexibility in internal governance mechanisms and ownership changes based on mutual agreement between partners.
· Cost Efficiency –
The formation and operational costs for LLPs are very much lower compared to private limited companies.
· Ease of Compliance –
With a limited no. of mandatory filings, LLPs enable partners to focus on growing their enterprise rather than navigating complex regulations.
· No Minimum Capital Requirement –
The absence of minimum capital makes LLP adoption accessible even to very early-stage startups with limited funds.
Disadvantages of LLP
Despite their advantages, LLPs also have certain drawbacks, including:
· Compliance Penalties –
While compliance requirements are lower, penalties and fines for non-adherence can still be substantial.
· Challenges in Raising Capital –
LLPs often face difficulties in attracting external investors and raising additional capital beyond partner contributions due to the partnership structure.
· Uncertain Long-Term Existence –
The requirement to maintain a minimum of two partners at all times can bring challenges. Failure to meet this could result in dissolution.
· Limited Growth Prospects –
Due to the absence of share capital and difficulty in finding new partners, expansion opportunities get restricted over time for LLPs.
· Partnership Disputes –
Conflicts between partners may lead to situations restricting smooth functioning and growth of the LLP and necessitating dissolution.
· Personal Liability for Misconduct –
Partners can be held personally liable for professional misconduct or negligent actions, exposing their personal assets.
Eligibility Criteria for LLP Registration Online
Successful LLP company registration is based on meeting specific eligibility criteria:
· Minimum Partners –
A total of two partners are required for Limited Liability Partnership formation, enabling collective decision making and responsibility sharing through mutual agreement.
· Partner Age –
All designated partners must have attained the age of majority i.e. 18 years at the time of LLP company registration. This ensures adequate legal capacity.
· Legal Status of Partners –
The partners must not have been declared insolvent or mentally unsound by any court. This safeguards the reliability of the partnership.
· Designated Partners Identification Number (DPIN) –
It is mandatory for all designated partners to acquire a unique DPIN which serves as an identifier for carrying out LLP compliances.
· Indian Resident Partner –
While foreign nationals can be partners, the LLP must have at least one designated partner who is a resident Indian citizen. This enables effective local governance.
Documents Required for LLP Registration
The following documents are important for LLP company registration:
· PAN Card –
PAN card is mandatory for identification of all designated partners and serves as an important proof of identity.
· Address Proof –
Verified address proof like Aadhaar card or voter ID card is required to validate the residence of all partners.
· Passport –
For overseas citizens/foreign nationals, a valid passport is necessary for purpose of ID and residence proof.
· Photographs –
Signed passport size photographs of all partners are required for government records.
· Identity proof –
Separate ID proofs like driving licence, Aadhaar card or ration card enable authentication of identity.
· Registered Office Proof –
Utility bill or ownership documents associated with the registered office address are imperative.
· Digital Signature Certificate –
For online filings and document attestation.
LLP Registration Process
The LLP registration process requires the following steps:
1. New User Registration –
The first step is to register on the Ministry of Corporate Affairs portal by creating a new user account which will be utilised for all filings.
2. Name Approval –
Based on the proposed LLP name, an application must be submitted for name approval. The name must be unique and comply with naming guidelines.
3. Obtain Designated Partner Identification Number –
All designated partners of the LLP must acquire a unique 10-digit DPIN which will serve as an identity proof for carrying out compliances.
4. Acquire Digital Signature Certificate –
To enable electronic submission of registration documents, all partners must obtain a Class 2 or 3 Digital Signature Certificate from authorised agencies.
5. Prepare Documents –
The LLP incorporation documents i.e., Form 2 needs to be prepared along with the required attachments such as address proofs and uploaded to the MCA portal.
6. Pay Fees –
The prescribed incorporation fees must be paid online through net banking or UPI.
7. Submit LLP Agreement –
Within 30 days of getting the approval, a partnership agreement providing all the mutual rights and duties has to be filed.
8. Apply for Certificate of Incorporation –
Finally, after all requirements are completed, the certificate of incorporation or LLP registration certificate can be applied from the Registrar of Companies.
Time for LLP Company Registration
In terms of timelines, if all documents are completed, Digital Signature Certificates are obtained and the proposed LLP name gets cleared quickly without objections, the entire registration process takes 10 to 15 days from submission of application.
This includes:
· 2-3 days for DSC application and issuance
· 1-2 days for name search and approval
· 7-8 days for scrutiny and approval of incorporation documents
· 1-2 days for obtaining the final certificate of incorporation
LLP Registration Fees in India
The LLP registration fees payable to the Ministry of Corporate Affairs is nominal and categorised based on total contribution designated by partners:
1. For capital contribution less than Rs. 1 lakh – Rs. 500
2. For capital contribution between Rs. 1 lakh to Rs. 5 lakhs – Rs. 2000
3. For capital contribution between Rs. 5 lakhs to Rs. 10 lakhs – Rs. 4000
Additionally, government stamp duty charges apply based on the state of LLP registration. Partners also have to account for professional fees and incidental expenses as LLP company registration cost.
Compliances of LLP
LLPs have to adhere to specific compliances to ensure regulatory compliance and governance:
· Maintenance of Books of Accounts –
LLPs must maintain books of accounts following double entry accounting system standards. Financial statements and annual returns must be prepared at the end of each financial year. LLPs with turnover exceeding Rs. 40 lakhs or capital over Rs. 25 lakhs must also get accounts audited.
· Filing of Annual Returns –
Annual filing of Form 8 (Statement of Account & Solvency) and Form 11 (Annual Return) constituting details of partners, business performance and solvency declaration is mandatory every financial year within 30 days of AGM or the due date.
· Income Tax Returns –
Irrespective of business activity or profits/losses, income tax returns must be filed by LLPs in Form ITR-5 before the deadline of September 30 every assessment year. Advance taxes here also apply.
· Updating Details –
Any changes in designated partners, registered office address or nature of business must be communicated to the registrar via requisite forms within given timelines failing which penalties may apply.
· Record Keeping –
Proper maintenance of incorporation documents, registers of partners or designated partners, annual returns and accounts and audit reports at registered office is obligatory.
Final Thoughts
Limited Liability Partnerships have come up as the preferred choice for entrepreneurial growth due to their operational flexibility as well as liability limitation for partners. By clearly understanding the registration needs, documentation requirements, application procedures, costs and timelines, potential entrepreneurs can go through the LLP formation process with convenience.
FAQs
1. What is LLP registration and why is it important?
LLP company registration is the process of establishing a Limited Liability Partnership. It’s important as it provides a legal structure for business activities and also protects personal assets of partners.
2. What are the fees associated with LLP registration?
The costs for registration of LLP vary based on the total capital contribution designated by partners and it is ranging from Rs. 500 to Rs. 4000, plus additional government stamp duty charges depending on the state of registration.
3. What is the step-by-step process for Registration of LLP?
The step-by-step process for Registration of LLP involves: new user registration, name approval, obtaining DPIN, acquiring DSC, preparing documents, paying fees, submitting LLP agreement, and applying for LLP registration certificate.
4. How can StartupFino assist with registration of LLP for businesses?
StartupFino can assist businesses with Registration of LLP by providing guidance for the registration process, ensuring compliance with regulations, and helping for the submission of necessary documents.
5. What services does StartupFino offer for startups seeking registration of LLP?
StartupFino offers many services for startups who need registration of LLP, including assistance with name approval, document preparation, fee payment, submission of LLP agreement, and obtaining the Certificate of Incorporation.
6. Can StartupFino help navigate the complexities of registration of LLP?
Yes, StartupFino can help to deal with complexities of registration of LLP by offering expert guidance, clarifying doubts, and ensuring smooth completion of the registration process.
7. Is there a dedicated support team at StartupFino for registration of LLP inquiries?
Yes, StartupFino has a dedicated support team available as LLP registration consultants for all related inquiries, providing personalised assistance and addressing any concerns for complete registration process.
