LLP Formation

    Khandhar Mehta and Shah | LLP Formation

    What is LLP?

    LLP stands for a limited liability partnership.

    LLP is a body corporate formed and incorporated under the LLP Act, 2008. In this business structure, partners get the benefits of limited liability and flexibility of a partnership. It is a legal entity separate from its partners. LLP Formation has been quite popular among entrepreneurs as it is a hybrid between a company and a partnership, and an LLP Registration provides the best of both worlds.

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    Limited Liability Partnership Key Features

    • Irrespective of changes in partners, the LLP continues to exist
    • It can purchase, sell, possess, own, enjoy, and transfer properties and can enter into contracts in its name
    • The entity must have at least two partners, and at least one of these partners must be a resident of India
    • The firm must have at least two individuals as designated partners
    • There is no limit on the maximum number of partners in the entity
    • All the partners can manage the business of an LLP; however, only designated partners are solely responsible for all compliances and penalties
    • The entity is liable to the full extent of its assets, but each partner is liable to the extent of his/her agreed contribution in the LLP
    • An agreement between the partners or between the partners and the LLP govern the determination of mutual rights and duties of all the partners within an LLP
    • The partners are not mutually liable for any other partner’s wrongful business misconduct or decisions

    What are the minimum requirements to be satisfied to become eligible for LLP registration?

    The minimum requirements to be satisfied to register an LLP are as follows:

    At least two partners must be there to register an LLP. There is no limit on the maximum number of partners in an LLP.

    At least one designated partner of LLP must be a resident of India. An individual is considered a resident in India if he or she stays in India for at least 182 days during the preceding financial year irrespective of their citizenship.

    The name of the entity must be unique. It must not match with the existing name of any trademark, company or LLP.

    Any amount of capital is okay for incorporation as an LLP. The minimum capital cannot be less than INR 10,000.0, while there is no restriction on the maximum capital amount that can be invested in the LLP.

    What are the documents required for LLP Formation in India?

    Following are the documents required to register LLP firm in India:

    LLP Registration Process

    LLP formation procedure is as follows:

    Application for obtaining Digital Signature Certificate

    All the designated partners are required to have a DSC except the normal partners. A digital signature is essential to sign and submit online forms. It is also required for signing and uploading the annual returns and income tax returns of the entity. To obtain DSC, photos, identity proofs, and address proofs of all the partners intending to get a digital signature are required. It is required to be renewed every one or two years.

    Application for obtaining Director Identification Number (DIN) for the partners

    Once digital signatures for partners are obtained, the partners can apply for DIN. Generally, no additional documents are required for DIN, and DIN registration happens immediately after obtaining DSC. Each person can have only one DIN, and it is not required to be renewed annually.

    Approval for the name of the LLP

    The application for LLP formation requires approval on the name of the entity. The name must follow the LLP naming Guidelines so that it is approved easily and fast. The proposed names must not be similar to the name of any existing company, LLP or trademark and must be unique. The name must contain the word LLP in the end and must have the relevant activity mentioned in it. The partners can submit a document mentioning the significance of the name and the business activities of the proposed LLP.

    ROC Filing for incorporation as LLP

    After all these applications for DSC, DIN, and name approval to the Ministry of Corporate Affairs (MCA), the application is filed in FILIP form along with all the other documents. The partners have 60 days to file the incorporation application along with all the other required documents. These documents must be updated and correct. If the partners do not apply within these 60 days, the name approval for LLP is required to be re-applied.

    A practicing CA or CS or Cost Accountant or an Advocate practicing at High Court must attest this form. The relevant fee amount depending on the proposed capital of the LLP, must also be submitted along with the form.

    Issuance of LLP Registration Certificate

    The Registrar verifies all the documents and the application. It issues the certificate of incorporation once he/she is satisfied with the documents.

    Filing of LLP Agreement with the Registrar of Companies (ROC)

    After receiving the certificate of incorporation from the Registrar, the partners of the LLP must enter into an LLP agreement and file it with the ROC within 30 days of the incorporation. The signatures of partners on the agreement must be done before a notary public. If the LLP agreement is not submitted within time, it attracts a penalty of INR 100 per day of delay.

    Application for PAN and TAN of LLP

    Now the partners can apply for PAN(Permanent Account Number) and TAN (Tax Deduction Account Number), which are essential for taxation purposes of the business. PAN is a 10 digit alphanumeric number issued to all the taxpayers in India, while TAN is a number assigned to a business for compliance with the provisions of withholding taxes.

    The application for PAN is in the prescribed form 49A to the income tax department. The allotment of the PAN is received within a week. Post that, LLP can apply for obtaining TAN.

    Opening of bank account

    Once the LLP is registered, the partners must also open a current account in a bank in the name of the LLP for the smooth conduct of its financial transactions.

    Key Differentiators

    KMS has a team of committed and sincere business setup consultants. We make the LLP formation process smooth for our clients. Our LLP formation services are comprehensive and hassle-free.

    KMS assist our clients in arranging the necessary documents of all the partners forming an LLP

    Our team handholds the clients in filling up the online forms with accurate information without any glitches
    We make the necessary applications for DIN and DSC of partners
    We help clients in preparing all the legal documents for LLP Formation
    We aid in the selection of names and checking for name availability
    We also provide support in opening a current bank account
    We support the clients in the filing of incorporation documents and drafting of LLP agreement
    We provide the required advisory services for capital to be invested and any other consultative services for LLP Registration
    We ensure that your communication and interaction with the regulatory authorities is smooth without any duplication of efforts

    OUR CLIENTS SAY

    trust.  transparency.  professional expertise.

    KMS’s team has been very supportive and patient with us in the entire process of LLP formation. They were always ready to answer our queries and clarify our doubts. They ensured that they were present in all steps of the process to complete it in time and without any problems for us. We will always be indebted to them for their proficient LLP registration services to us.
    Partner, IT Firm
    I have been impressed with the level of quality services that you provided in the times of LLP formation. Please pass my thanks and congratulations to the team that supported us in this journey. I will certainly recommend you to others in my friends and business circle who are looking to form or register an LLP.
    Partner, Consulting Firm
    Loved the way your team assisted us in the entire LLP formation process. Your team was responsive, helpful, and cordial when we raised any queries or concerns. You would always remain in our good books and we shall surely contact you for further services. Thank you once again!
    Partner, Wholesale Distribution Firm

    frequently asked questions(faqs)

    An agreement is signed between all the partners of an LLP firm or between each partner and LLP, detailing the mutual rights and duties of all the partners, rights and obligations of the LLP, profit sharing ratio, and capital contribution ratio. It’s an essential document in the LLP formation process. Once the LLP is incorporated, the partners must sign this agreement and submit a copy to the Registrar of Companies within 30 days.
    In a private limited company, a minimum of two members are required, and the maximum can be 200. In an LLP, the minimum number of partners required is two, but there is no limit on the maximum number of partners. In the case of an LLP, there is no limit on the maximum number of partners while for a private limited company, there can be 15 directors at a maximum. Compliance requirements are high for a private limited company, but low for LLPs. In LLP, FDI is allowed via automatic route only while in a private limited company; it is allowed both ways – automatic and government route.
    The LLP form of an entity has a few advantages that other business forms do not enjoy. They are •Partners are not liable for the entire amount of losses that the LLP suffers. They are limited only to the amount proportionate to their contribution to the entity.

    • Even if a partner dies, retires, or leaves the entity, the LLP continues to exist.

    • LLP has the right in its name to own, enjoy, and transfer property.

    • The ownership of an LLP entity can be transferred from one designated partner to another designated partner. Even if it is transferred to another person, that person must be first inducted as a designated partner.

    • LLP has a separate existence from its partners, and both the partners and the LLP can sue each other and be sued.

    • Other structures of entities have more regulations to comply with in comparison to the LLP form of entity.

    • There does not exist any dividend tax in LLP. Both the LLP entity and the partners can give loans to each other.

    • The cost of LLP formation is low.

    • An audit is mandatory for LLP entities only if they have a turnover of more than INR 40 lakhs and capital contribution of more than INR 25 lakhs. Below these amounts, an audit is not required.