Limited Liability Partnership is a business structure that offers partners the freedom to collectively manage the business and is an excellent fit for a range of professional services firms, including law firms, accounting firms and consultancy services. Moreover, small and medium-sized enterprises also find LLPs to be a favourable choice.
The Limited Liability Partnership Act of 2008 guides the operations, provides compliances and sets the rules for LLPs. This act strikes a balance between empowering partners to run the business and implementing the necessary measures to ensure transparency and adherence to regulations.
Why Should an LLP be Registered?
LLP registration is an important step for entrepreneurs and businesses looking to establish an LLP in India. It provides several advantages, including legal recognition, limited liability protection and access to various business benefits. Some of the key reasons why LLP registration is important are-
· Limited Liability Protection-
LLP registration offers partners limited liability protection, shielding their personal assets from business debts and liabilities and ensuring that partners’ personal wealth remains protected.
· Separate Legal Entity-
Once registered, an LLP becomes a separate legal entity distinct from its partners. It can enter into contracts, own property and engage in legal proceedings in its own name. This legal recognition enhances the credibility and reputation of the business.
· Easy Transfer of Ownership-
LLPs offer flexibility in terms of transferring ownership. Partnerships can be easily added or removed, allowing for smooth business transitions. This ease of ownership transfer enhances the business’s longevity and adaptability.
· Taxation Benefits-
LLPs enjoy the benefits of pass-through taxation, where the profits are taxed at the partners’ individual income tax rates. This allows for a simplified tax structure and potentially reduces the overall tax burden on the LLP and its partners.
· Business Opportunities-
LLP registration opens up a wide range of business opportunities. Many government contracts, tenders and projects are exclusively available to registered entities. Additionally, LLP registration can instil confidence in potential clients, lenders and investors, leading to enhanced business opportunities and growth prospects.
Fees for Incorporation/Registration of LLP in India
Certain registration fees need to be borne during the process of incorporation of LLPs in India, which include-
Application fees for LLP registration
When registering an LLP in India, one of the initial costs to consider is the application fees. The application fees for LLP registration vary based on the authorised capital of the LLP. The fees are payable to the Registrar of Companies and are determined by the Ministry of Corporate Affairs of the govt.
Stamp duty charges for LLP agreement
Stamp duty charges are another important component of LLP registration fees. LLPs are required to execute a Limited Liability Partnership agreement, which outlines the rights, duties and obligations of the partners. The LLP agreement needs to be executed on non-judicial stamp paper and the stamp duty charges vary across different states in India. The stamp duty is typically calculated based on the capital contribution and the value of the LLP agreement.
RoC filing fees
LLPs are required to file various documents and forms with the RoC during the registration process and for subsequent compliance requirements. The RoC filing fees vary depending on the type of form being filed. For example, the Form 2, which is the application for the incorporation of an LLP, incurs a specific fee. The fees for other forms, such as Form 3 for the appointment of partners or Form 11 for annual returns, may also apply. The RoC filing fees are subject to change and it is essential to refer to the MCA website or consult with a professional for the latest fee structure.
Professional fees for legal and consultancy services
Engaging the services of professionals such as lawyers or chartered accountants is common practice during the LLP registration process to aid throughout the process of incorporation and compliance.
Document filing fees
LLPs are required to file various documents with the RoC throughout their existence, including annual returns, financial statements and other statutory filings. These filings may attract document filing fees. The fees for document filing vary depending on the type of document being filed and the authorised capital of the LLP. It is important to comply with the filing requirements and pay the requisite fees within the specified timelines to avoid penalties and non-compliance issues.
Associated Costs for the Registration of LLP in India
In addition to the registration fees discussed above, certain associated charges that an LLP has to pay are-
Legal and professional fees for drafting LLP agreement
One of the significant costs associated with LLP registration in India is the fees for legal and professional services required to draft the LLP agreement. The LLP agreement outlines the rights, responsibilities and profit-sharing arrangements among the partners. The complexity of the agreement and the involvement of legal professionals will determine the fees. It is advisable to engage experienced professionals to ensure that the LLP agreement is comprehensive and legally sound.
Notary and stamping charges for the LLP agreement
LLP agreements need to be notarised and stamped to establish their authenticity and legal validity. Notary and stamping charges vary from state to state in India. These charges depend on the capital contribution of the partners or the value of the LLP agreement. It is essential to factor in these charges when calculating the overall cost of LLP registration.
Cost of obtaining a registered office address
LLPs are required to have a registered office address for official correspondence and compliance purposes, whose cost varies depending on the location and the type of premises.
Costs related to obtaining necessary licences and permits
Additional costs may be incurred by the LLP for acquiring essential licences and permits, depending on the nature of its business activities. In regulated sectors like finance, healthcare or food services, specific licences or permits may be obligatory. The expenses associated with securing these licences are subject to variation based on the specific type of business and the regulatory mandates in place.
Expenses for obtaining statutory books and registers
LLPs are required to maintain certain statutory books and registers as per the LLP Act. These include the Register of Partners, Register of Charges, Minutes Book and others. The cost of obtaining these books and registers will depend on the number of partners and the complexity of the LLP structure. It is advisable to consult with professionals like StartupFino to ensure compliance with statutory requirements and estimate the associated costs.
Government and Compliance Costs for LLPs in India
Furthermore, an LLP is necessitated to comply with certain government costs as well, which can include-
Annual filing fees with the Registrar of Companies (RoC)
LLPs in India are required to file annual returns and accounts with the RoC to maintain compliance. The RoC charges annual filing fees based on the LLP’s turnover, which is available on the MCA portal.
It is important to adhere to the deadlines for annual filing to avoid late filing fees or penalties.
Costs of maintaining statutory registers and records
LLPs are required to maintain various statutory registers and records as mandated by the LLP Act. These include the Register of Partners, Register of Charges, Minutes Book and other relevant records. The cost of maintaining these registers and records may vary depending on the complexity of the LLP’s operations and the number of partners involved. It may include expenses for physical storage, software systems or engaging professional services for record maintenance.
Penalty fees for non-compliance with filing and regulatory requirements
The penalty fees depend on the nature and severity of the violation. Late filing fees, additional charges for delayed compliance and penalties imposed by the RoC or other regulatory authorities may apply. It is very important to prioritise compliance to avoid unnecessary financial liabilities and legal issues.
Taxation Costs and Obligations for LLPs in India
Costs related to taxation and other such miscellaneous expenses are also inclusive of the following-
Tax registration and compliance costs
Various tax obligations are applicable to LLPs in India, necessitating a comprehensive understanding of the tax registration and compliance costs associated with such entities. LLPs are obligated to acquire a Permanent Account Number and a Tax Deduction and Collection Account Number. The fees for PAN and TAN registration vary and depend on the authorised capital and the turnover of the LLP. Additionally, engaging the services of a tax professional or chartered accountant to ensure compliance with tax regulations may incur additional costs.
Income tax rates and obligations for LLPs
LLPs in India are taxed as a separate legal entity and their income is subject to income tax. LLPs are not liable to pay income tax at the entity level, but the partners are responsible for paying tax on their share of LLP profits. The income tax rates for LLP partners are based on their individual income tax slab rates. LLPs have to compulsorily file income tax returns annually.
Goods and Services Tax obligations for LLPs
In the event that the turnover threshold stipulated under the Goods and Services Tax Act is met by an LLP involved in the provision of goods or services, the LLP becomes liable to undergo GST registration. GST registration involves costs such as application fees, professional fees for assistance and ongoing compliance costs. LLPs are required to file regular GST returns, maintain proper records and comply with GST regulations.
Final Thoughts
LLP registration fees and associated costs are an important aspect of starting and maintaining a successful business in India. Only by understanding the registration process, fees and associated costs, entrepreneurs can effectively plan their finances, ensure compliance with legal requirements and protect their interests.
It is also equally important to seek professional advice from an expert team, allocate funds wisely and stay updated with regulatory obligations to establish a strong foundation for an LLP, all of which can be helped by StartupFino’s expert team. With careful planning and prudent financial management, it is possible to start an entrepreneurial journey with confidence and clarity.
For finding out more on the fees associated with LLP registration, connect with our team at StartupFino.
