A Limited Liability Partnership (LLP) is a legal entity similar to a private limited corporation or a partnership firm. The Limited Liability Partnership Act of 2008 governs it. It is a one-of-a-kind structure with elements of both a corporation and a partnership. An LLP, like a corporation, is a legal body distinct from its partners that can sue and be sued in its own name and has perpetual succession. This blog will discuss the detailed requirements and process of LLP Registration for NRIs and Foreign Nationals looking to register an LLP.
An LLP is a popular company form among NRIs and foreign nationals due to its customizable structure and limited liability protection. In contrast to a traditional partnership, where each partner is individually liable for the company’s debts and liabilities, an LLP gives its participants less accountability. Because they are only accountable for the level of their capital investment, this safeguards the partners’ personal assets from any financial or legal implications emerging from the company’s operations.
What are the Options for NRIs and Foreign Nationals to Enter the Indian Market?
When considering an entry into the Indian market, NRIs and Foreign Nationals have various strategies to choose from, each with its own advantages and considerations:
1. Incorporation of Company:
- Establishing a private limited company or investing in an existing one has emerged as a favored India entry strategy.
- The appeal lies in the option of 100% Foreign Direct Investment (FDI) under the automatic route, a significant advantage for NRIs and Foreign Nationals.
- Private limited companies benefit from the ease of entry and the prospect of full foreign ownership.
2. Opening of Branch Office:
- Creating a branch office involves obtaining approval from the Reserve Bank of India (RBI).
- This avenue tends to be more complex compared to incorporating a private limited company.
- Furthermore, RBI approval for a branch office is typically granted to well-established businesses with a commendable financial track record.
- Consequently, due to the intricate process and stringent criteria, setting up a branch office in India isn’t a common choice for NRIs and Foreign Nationals.
3. Registration of LLP:
- Previously, investment in a Limited Liability Partnership (LLP) by NRIs and Foreign Nationals necessitated government approval, making it a protracted and costly endeavor.
- However, with the relaxation of FDI regulations in November 2015, the scenario transformed.
- NRIs and Foreign Nationals can now easily register an LLP, which makes it an appealing investment avenue.
- This alteration simplifies the process, rendering LLP registration an attractive option for establishing small businesses in India with foreign direct investment.
Advantages of LLP Registration for NRIs & Foreign Nationals
The benefits of LLP registration for NRIs and foreign nationals are as follows:
Limited Liability Protection:
Partners in an LLP are shielded from personal liability for the company’s debts and obligations due to the legal provision of limited liability. This safeguard ensures that personal assets of NRIs and foreign nationals remain protected.
Flexibility in Management:
LLPs offer a high degree of managerial flexibility, granting NRIs and foreign nationals the autonomy to administer the company according to their vision, without external interference. This flexibility enhances operational efficiency.
No Minimum Capital:
LLPs do not impose a minimum capital requirement, simplifying the process of business initiation for NRIs and foreign nationals. This feature eliminates financial barriers and encourages entrepreneurship in India.
Ease of Compliance:
Compared to other business structures, LLPs entail fewer compliance obligations. This simplified compliance framework reduces administrative burdens, enabling smoother company operations and management for NRIs and foreign nationals.
Tax Advantages:
The taxation regime of LLPs grants significant advantages to NRIs and foreign nationals. Being treated as partnerships for tax purposes, LLPs are exempt from corporate income tax. Instead, partners are individually subject to taxation, potentially leading to reduced tax liabilities.
Foreign Direct Investment (FDI) in LLP
Subsequent to the amendments made to FDI regulations on November 10th, 2015, noteworthy changes were introduced with regards to FDI in Limited Liability Partnerships (LLPs). Under the revised regulations, 100% FDI in LLPs is now permissible through the automatic route. This implies that foreign investors can invest up to 100% of the capital in LLPs without necessitating prior government approval.
The key points regarding FDI in LLPs are as follows:
· 100% FDI Permitted:
Foreign investors, including NRIs and Foreign Nationals, are now authorized to hold 100% ownership in an LLP.
· Applicable Sectors:
This relaxation applies to sectors or activities where 100% FDI is permitted via the automatic route.
· No FDI-Linked Performance Conditions:
LLPs engaging in sectors with 100% FDI allowance under the automatic route are not subject to FDI-related performance conditions.
· Downstream Investment:
In addition to the above, LLPs are also empowered to make downstream investments in other companies or LLPs. This is applicable within sectors where 100% FDI is sanctioned under the automatic route, and where FDI-linked performance conditions are absent.
Required Documents for LLP Registration for NRIs and Foreign Nationals
To successfully register an LLP for NRIs and foreign nationals, the following essential documents are needed:
1. Identity Proof:
Valid proof of identity, such as a passport, for all partners involved in the LLP.
2. Address Proof:
A valid proof of address, like a utility bill or a rental agreement, for each partner participating in the LLP.
3. PAN Card:
PAN (Permanent Account Number) cards of all partners are mandatory for LLP registration.
4. LLP Agreement:
A comprehensive LLP agreement outlining the terms and conditions among the partners. This agreement specifies the roles, responsibilities, profit-sharing ratios, and other essential aspects of the partnership.
5. Consent of Partners:
Written consent of each partner confirming their willingness to be part of the LLP and to adhere to the LLP agreement’s terms.
Requirements for LLP Registration for NRIs and Foreign Nationals
To initiate the process for LLP registration for NRIs and Foreign Nationals in India, several essentials must be met as outlined below:
Minimum Directors and Shareholders
· There must be a minimum of two designated directors for the LLP, with at least one of them being an Indian citizen residing within India.
· Additionally, a minimum of two shareholders is required for the LLP registration.
Registered Office
· An essential requirement is to have a registered office located within India.
Documentation for NRIs
· As already stated, NRIs seeking LLP registration must provide valid documentation proving their Indian origin. This documentation includes:
- Valid proof of identity
- Proof of address
- Other relevant documents establish the NRI’s Indian origin.
Document Attestation
· All relevant documents that are part of the registration process need to be attested by either a notary or the Indian Embassy.
Additional Requirements
· Alongside the above, the following requisites must also be fulfilled:
- Possession of a valid mobile number and email ID.
- Submission of a passport-sized photograph.
- Furnishing a digital signature.
- Providing self-attested copies of the passport and address proof.
Process of LLP Registration for NRIs and Foreign Nationals
The process for LLP registration for NRIs and Foreign Nationals involves the following given steps:
1. Obtaining the Digital Signature Certificate
All prospective LLP partners, including NRIs and Foreign Nationals, need to possess a valid digital signature and acquire a Digital Signature Certificate. This certificate is important, and you can get it by filling out an application and including copies of your passport and address proof. You need to send all this to the Certifying Authority, which usually takes about one to three days. The Digital Partner Identification Number can only be obtained after securing a valid Digital Signature Certificate.
2. Obtaining the Digital Partner Identification Number
With the obtained Digital Signature Certificate, the proposed partners can apply for a Digital Partner Identification Number, an essential for the process of LLP registration for NRIs and Foreign Nationals. This step typically spans one to two days.
3. Approval of LLP Name
After acquiring the Digital Partner Identification Number for the partners, an application must be submitted to the Ministry of Corporate Affairs to reserve a distinctive name for the LLP. The chosen name should align with guidelines set by the Ministry, ensuring uniqueness and differentiation from existing LLP names. This application may include up to six proposed names, as stipulated by the Limited Liability Partnership Act of 2008. Once the Government of India approves a name, an application for LLP incorporation can be filed within 60 days. This stage generally takes one to seven days.
4. Incorporation of the LLP
Upon receiving approval for the chosen LLP name from the Government of India, an application for the process of LLP registration for NRIs and foreign nationals, accompanied by necessary documents, is submitted to the Ministry of Corporate Affairs. Following scrutiny of the application and fulfillment of prerequisites, the Ministry issues a certificate of incorporation. This phase generally requires one to seven days for completion.
5. Filing of the LLP Agreement
Subsequent to obtaining the certificate of LLP registration for NRIs and Foreign Nationals, the LLP agreement must be executed and filed with the Ministry of Corporate Affairs within 30 days of receiving the certificate of incorporation.
Final Thoughts
The process of LLP registration for NRIs and Foreign Nationals in India involves specific essentials and steps. A Limited Liability Partnership (LLP) combines aspects of both a corporation and a partnership, offering distinct advantages like limited liability protection and managerial flexibility. Foreign Direct Investment (FDI) regulations underwent changes in 2015, permitting 100% FDI in LLPs through the automatic route.
NRIs and Foreign Nationals can choose from various entry strategies, including incorporating a company, opening a branch office, or registering an LLP. The preferred approach often hinges on factors like FDI regulations, ease of compliance, and liability considerations. Gathering required documents, obtaining a Digital Signature Certificate, securing a Digital Partner Identification Number, approving the LLP name, incorporation, and filing the LLP agreement form the core of the process of LLP registration for NRIs and Foreign Nationals.
For more information on the process of LLP registration for NRIs and foreign nationals, connect with our experts at StartupFino.
