Limited Liability Partnership (LLP)

Limited Liability Partnership Online Registration in India

LLP has now come up as one of the most preferred legal entities for Professionals as well as service organisations owing to the flexibility attached under the Limited Liability Partnership Act. There is flexibility with respect to the structuring of management and ownership as well as lesser number of compliances as compared to a private limited company. There should be a minimum number of 2 Designated Partners for any LLP and they should procure Director Identification Number and Digital Signature for registration of the LLP. LLP registration normally is more time consuming as compared to a private limited Company.

Benefits of Limited Liability Partnership

Limited Liability

Personal liability of an individual partner arising from omissions, errors, negligence or incompetence limited to cash/kind contributions made by that partner.

Reasonable Formation Costs

The cost of incorporating an LLP is lesser compared to a private or public company.

Relaxed statutory compliances

Entrepreneurs form LLP’s often make use of relaxed statutory compliances

Relaxed auditing norms

Limited Liability Partnerships are not required to audit their books of account where their annual turnover is less than INR 40 lakhs or if the contribution is less than INR 25 lakh

No Minimum Capital Contribution Norms

No specific requirement on the minimum capital contribution by partners.No restriction on a number of partners.There is no limit on the maximum number of partners in an LLP.

Relaxed Government Regulations

LLP has minimum compliances and government interventions. This makes its viable option first-time entrepreneurs looking for a good business form.

The Incorporation Process For Limited Liability Partnership Are As Follows:

You need to have the following set of documents before proceeding for registration:

  • Self-attested PAN card copy of proposed Designated Partners
  • Self-attested Address Proof of Proposed Designated Partners (Passport or Driving Licence or Voters ID or Aadhar Card)
  • Self-attested Latest Bank Statement or Mobile Bill or Gas (Not older than 2 months)
  •  Address proof of the proposed Registered Office (electricity bill or Landline or Gas Bill and It can be a residential property) and rental agreement
  • No Objection (NOC) from the person who owns the property mentioned above (we will prepare)
  • 2 passport size photos of proposed Designated Partners LLP Incorporation Process:

Its hard to digest all if it is at one stretch. So an introduction about a business or start up formation options is vital for deciding the right form of business registration. The Companies Act, 2013 and Limited Liability Partnership Act, 2008 have brought more business formation choices for entrepreneurs. The key factors that influence the legal form of a business are nature of your business, customer’s profile (corporate, small businesses or individuals ), expected business turnover, scalability  of your business idea and future funding prospectus.

 

Every entrepreneur/promoter should take the pain to know about the pros and cons of these legal forms.

 

Formation

Do I need a Registration?

What type of business names can I keep?

How risky is it for me?

To what extent is each member of the business liable?

Tell me the minimum membership limit.

Is foreign ownership allowed?

How much will I get taxed?

What are my annual tax filing norms?

Is Annual Audit Required?

Can I convert my business into any other legal form??

Compulsory Conversion to Private Limited Company Applicable?

Limited Liability Partnership

Ministry of Corporate Affairs registers an LLP business under the Limited Liability Partnership Act, 2008.

Firstly, submit a set of names to Registrar of Companies, wait for approval from Registrar. Best practice is that the names submitted must be inoffensive, legal and not similar to any registered LLP’s or companies.

“LLP” is a separate legal person in the eyes of law, registered under LLP Act 2008. So, the partners are not responsible for business’ liabilities.

Liable to the extent of their contribution (in money, in kind or in services extended) to the LLP.

2 People

Yes

Profits get taxed at 30% plus cess and surcharge is applicable if profit exceeds 1 Cr.

Every financial year Annual Statement of Accounts & Solvency and Annual Return with the Registrar.Plus, Income Tax must be filed separately.

Statutory audit is to be conducted if partners contribution exceeds 25 lakhs or turnover exceeds 40 lakhs. Income tax audit is applicable if turnover exceeds 2 Crs

Yes, Private Limited Company can be converted into a Public Company or LLP. Even, Public Limited Company can be converted into a Private Limited Company.

NO

Private Limited Company

Yes, Ministry of Corporate Affairs registers Private limited company under the Companies Act, 2013

Firstly, submit a set of names to Registrar of Companies, wait for approval from Registrar. Best practice is that the names submitted must be inoffensive, legal and not similar to any registered LLP’s or companies

Private Limited Company is a separate legal person in the eyes of law, registered under Companies Act 2013. So, the shareholders are not responsible for business liabilities.

Liability is limited to his/her share capital contribution.

2 People

Yes

Profits get taxed at 25% plus cess and surcharge is applicable if profit exceeds 1 Cr.

Every financial year Private Limited Company must file Annual Accounts and Annual Return with the Registrar of Companies. Plus, Income Tax must be filed separately.

Statutory audit is to be conducted irrespective of business transaction and turnover. Income tax audit is applicable if turnover exceeds 2 Crs

Yes, Private Limited Company can be converted into a Public Company or LLP. Even, Public Limited Company can be converted into a Private Limited Company.

NO

Partnership

Yes. Register with Registration of Firms

Firm can use any name that he likes, but avoiding names already trademarked is advisable.

Partners will stand liable for the liabilities of the business.

Unlimited liability.

2 People

No

Profits get taxed at 30% plus cess and surcharge is applicable if profit exceeds 1 Cr.

Only Income Tax must be filed for the income of firm and partners.

Only income tax audit is applicable if the turnover exceeds limit of 2 Cr

Yes, Partnership can be converted into a Private Limited Company or LLP.

NO

One Person Company (OPC)

Yes, Ministry of Corporate Affairs registers One Person Companies under the Companies Act, 2013

Firstly, submit a set of names to Registrar of Companies, wait for approval from Registrar. Best practice is that the names submitted must be inoffensive, legal and not similar to any registered LLP’s or companies

OPC is a separate legal person in the eyes of law. So, the share holder is not responsible for business liabilities.

Liability is limited to his/her share capital contribution.

1 People

NA

Profits get taxed at 25% plus cess and surcharge is applicable if profit exceeds 1 Cr.

Every financial year OPC must file Annual Accounts and Annual Return with the Registrar of Companies. Plus, Income Tax must be filed separately.

Statutory audit is to be conducted irrespective of business transaction and turnover. Income tax audit is applicable if turnover exceeds 2 Crs

OPC could be converted into any legal form. But, it depends on the number of promoters, business operations, funding requirements and other factors. Limited Liability Partnership or Private Company is preferred by promoters when seeking expansion of their OPC

NO

Sole Proprietorship

No legal requirement to do-so.

Promoter can use any name that he likes, but avoiding names already trademarked is advisable.

Promoter will stand liable for the liabilities of the business. Because the business is not considered as a separate legal person/entity.

Unlimited liability.

1 People

NA

Individual income tax slab of proprietor is the basis of taxation.

Only Income Tax must be filed on the basis on proprietor’s income.

Only income tax audit is applicable if the turnover exceeds limit of 2 Cr

NO

Yes. If turnover exceeds 2 cr

What is an LLP?

It is a partnership with the partners having limited liability. LLPs are also distinct from its partners.

What type of business is ideal for LLPs?

LLPs ideally suit partnerships, where there are relatively more numbers of partners and their liabilities, can be limited.

What are the members of an LLP called?

Members of an LLP are called as Partners

What are the documents required to establish an LLP?

Scanned copies of the following documents are required to register an LLP;

  1. PAN Card
  2. Passport in case of Foreign Nationals / NRIs
  3. Voter’s ID/Passport/Driver’s License
  4. Bank Statement/Telephone or Electricity Bill, latest
  5. Passport-sized photograph
  6. Specimen signatures of Directors
  7. Rent Agreement or No-Objection Certificate from the owner of the premises
  8. A copy of Sale Deed, if owned.

How much time is required to register an LLP?

Scanned copies of the following documents are required to register an LLP;

  1. PAN Card
  2. Passport in case of Foreign Nationals / NRIs
  3. Voter’s ID/Passport/Driver’s License
  4. Bank Statement/Telephone or Electricity Bill, latest
  5. Passport-sized photograph
  6. Specimen signatures of Directors
  7. Rent Agreement or No-Objection Certificate from the owner of the premises
  8. A copy of Sale Deed, if owned.

Is it difficult to get a name of my choice for my LLP?

Getting a name of your choice is easy if you follow few basic guidelines such as avoiding similar names of existing companies of LLPs and  similar sounding names  or those containing prohibited words such as Government, Bank, Exchange etc unless otherwise approved by the respective authorities.

Is it necessary for me to obtain a digital certificate?

Since documents are filed electronically, Digital Certificate (DSC) is mandatory. Once obtained, you can use this DSC for various other purposes where a digital signature is required.

What are the suffixes that apply to my business name?

“Limited Liability Partnership” or “LLP”. This suffix should be at the end of the business name.

What type of business names can be kept for an LLP?

Firstly submit a set of names to Registrar of Companies, wait for approval from Registrar. Best practice is that the names submitted need to be inoffensive, legal and not similar to any registered LLP’s or companies.

Why should you register an LLP?

Ministry of Corporate Affairs registers an LLP business under the Limited Liability Partnership Act, 2008.

Is it necessary to audit the books of accounts of an LLP?

Audit is mandatory only if the turnover of the LLP is more than Rs 40 Lakhs or Capital is more than Rs 25 Lakhs.

To what extent is each member of the business liable?

Liable to the extent of their contribution (in money, in kind or in services extended) to the LLP.

What is the minimum membership limit for an LLP?

Two persons

What is the maximum membership limits for an LLP?

Unlimited number of partners

Can the LLP’s ownership be transferred?

No

What is the LLP taxation rules that I need to know now?

Profits get taxed at 30% plus surcharge and cess are also applicable.

What are LLP’s Annual tax filing norms?

Every financial year Annual Statement of Accounts & Solvency and Annual Return to be submitted to the Registrar. In addition Income, Tax must be filed on the basis of income of the LLP.

Can I convert LLP into any other legal form?

Conversion of LLP into Company is not possible under the present regulations

Can I bring foreign funding?

LLPs and Private Companies can get Foreign Direct Investment or Investment in selected sectors subject to the provisions of FEMA and FDI Regulations.

My another partner is not in Bangalore? How to do this then?

You can proceed with the registration provided the other partner signs the necessary documents and get the attestation done from his/her locality

My another partner is abroad/foreigner?

You can proceed with the registration provided the other partner signs the necessary documents and get the attestation done from his Country as per the Legal requirements.

Can I make my wife as a partner? Does she need to file IT return then?

Yes, your wife can be made a partner. Yes if the income exceeds the taxable limit, then the return needs to be filed

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