As per the Limited Liability Partnerships Act of 2008 also known as the LLP Act, Limited Liability Partnerships or LLPs are entities with the characteristics of a typical partnership and the status of limited liability possessed by private limited companies. Any obligations that result from the partnership are addressed in accordance with the relevant LLP agreement.
In an LLP, the partners invest money, skills and resources in the company and they divide profits and losses in accordance with the LLP agreement’s conditions. The LLP agreement acts as a fundamental instrument that specifies the partners’ rights, obligations and liabilities.
Advantages of LLP Registration
The following are the merits of LLP registration:
Limited liability protection
One of the significant advantages of LLP registration is the limited liability protection it offers to its partners.
Flexible management structure
The partners have the freedom to define their roles and responsibilities, as well as the decision-making process within the LLP.
Tax benefits
LLPs enjoy certain tax benefits. The profits of an LLP are taxed at the partnership level and partners are not subject to double taxation.
Credibility and professional image
LLP registration enhances the credibility and professional image of the business.
Disadvantages of LLP Registration
The following are the demerits of LLP registration:
Legal formalities and compliance requirements
LLP registration involves various legal formalities and compliance requirements.
Joint and several liability
LLPs are structured as partnerships and partners have joint and several liability , that is in case of any default, each partner can be held individually liable for the LLP’s debts and obligations.
Limited fundraising options
Compared to companies, LLPs may face limitations in raising funds. They cannot issue shares or equity to attract external investment.
Eligibility Criteria for LLPs in India
To register an LLP, it is important to meet certain eligibility criteria. The following are the essential requirements:
Minimum of 2 designated partners and DSC of all the partners:
An LLP must have a minimum of two designated partners and all partners must possess a Digital Signature Certificate (DSC). The DSC enables partners to sign documents electronically, thereby ensuring authenticity and security.
DPIN of all the serving partners:
All partners in the LLP must obtain a Designated Partner Identification Number (DPIN). This unique identification number is necessary for the partners to fulfil their roles and responsibilities within the LLP.
Unique Name of the entity:
The LLP should have a distinct name which has not been already registered as a company or trademark. It is important to conduct a thorough name search to ensure compliance and avoid conflicts with existing entities.
Capital contribution made by the serving partners of the LLP:
Partners must contribute capital to the LLP as per the agreed terms.
LLP Agreement:
The LLP agreement lays down the rights, duties and obligations of the partners, as also the rules that will govern the LLP’s operations.
Proof of registered office of the LLP:
A valid proof of the registered office address of the LLP must be provided during the registration process, which can be in the form of a NOC, a lease agreement, ownership documents and other similar documents.
Documents Required for LLP Registration
For getting an LLP registered in India, the following are required:
Address Proof:
Valid address proof documents, for eg. Aadhaar card, Driver’s License or any other government issued id card, need to be provided for all the partners.
Identification Proof:
PAN (Permanent Account Number) card is mandatory for all the partners. Additionally, documents like Voter ID, Aadhaar card and driving license can also be submitted for identification purposes.
Residential Proof:
Recent bank statements, telephone bills, electricity bills or any other documents serving as proof of residence for all the partners are required.
Passport and Visa:
If any of the partners are foreign nationals, a valid passport and visa must be provided as identification proof.
Photographs:
Passport-size photographs with a white background are required for all the partners.
Digital Signature Certificates (DSC):
DSCs are essential for digitally signing documents and applications. All partners must obtain their individual DSCs.
No Objection Certificate (NOC):
In case the registered office of the LLP is on leased premises, a NOC from the landlord is necessary.
Utility Bill:
A utility bill such as a water bill or electricity bill that displays the address of the registered office is required as proof of address.
Procedure for LLP Registration in India
The procedure for LLP registration in India involves the following below mentioned steps that need to be followed:
Obtaining DPIN and DSC:
Firstly, to initiate the LLP registration process, partners are required to obtain a Designated Partner Identification Number (DPIN) and acquire Digital Signature Certificates (DSCs) for each partner.
Reservation of Name:
After obtaining the necessary DPINs and DSCs, the next important step is to reserve a unique name for the LLP. This can be done using the LLP-RUN (Reserve Unique Name) service, which not only checks the availability of the desired name but also reserves it for a period of 90 days to ensuring exclusivity.
Filing Incorporation Forms:
Once the name is successfully reserved, partners need to file the incorporation documents with the RoC. This involves submitting forms such as FiLLiP (Form for incorporation of Limited Liability Partnership) and Form LLP-1. These forms provide essential information about the LLP, its partners and the registered office address.
Drafting LLP Agreement:
The partners have to very diligently draft an LLP agreement, which outlines the rights, duties, as well as the responsibilities of each partner and also states the operational details of the LLP, which must be filed within 30 days of incorporation using Form LLP-3.
Filing Additional Documents:
Alongside the incorporation forms and LLP agreement, partners must also submit additional documents to the RoC to authenticate the identity of the partners and the registered office address, which usually include address proof, identity proof and consent forms.
Certificate of Incorporation:
After the Roc has done his review and verification of all the submitted documents, he will issue the Certificate of Incorporation. This certificate is meant to serve as the official confirmation of the LLP’s existence as a separate legal entity, providing partners with the necessary legal standing to conduct their business operations.
The Final Note
Registering a Limited Liability Partnership or LLP in India requires fulfilling certain eligibility criteria and submitting the necessary documents. The LLP Act of 2008 governs the basic requirements and processes involved in LLP registration, including the requirement of at least two partners, a distinct name, an LLP agreement, an Indian partner, DPIN numbers, DSCs for partners and a physical office address. In addition to these, the partners must provide PAN cards or ID proofs, address and residence proofs, photographs and passports if applicable. The LLP needs to submit proof of its registered office address and obtain a Digital Signature Certificate (DSC).
Registering as an LLP provides the benefits of limited liability protection and the flexibility of a partnership structure. It becomes essential to follow the registration process carefully and seek professional assistance when drafting the LLP agreement to ensure compliance with legal requirements. On fulfilling the necessary criteria and completing the registration process, entrepreneurs can establish an LLP and enjoy the advantages it offers in terms of liability protection and operational flexibility. For more details, connect with our experts at StartupFino.
