Khandhar Mehta and Shah
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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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.
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.
OUR CLIENTS SAY
• 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.