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Limited Liability Partnership (LLP)

March 30, 2019
Limited Liability Partnership (LLP) 

Limited Liability Partnership (LLP) in India took shape after January 2009, making it an instant success with startups and professional services. Limited Liability Partnership Registration, governed by LLP Act 2008 combines the benefits of a partnership with that of a limited liability company. LLP was introduced to provide a form of business that is easy to maintain and to help owners by providing them with limited liability.

Why register an LLP company? - Benefits

The most vital reason for registering as LLP is the limited liability. The members of the firm are only liable for a small amount of debt incurred by it. This is entirely different from proprietorship and partnership where the personal assets of directors and partners are not protected if the business becomes bankrupt.

SEPARATE LEGAL ENTITY:

  • LLP is a separate legal entity from the partners. Each partner can sue the other in case a situation arises.
  • It has an uninterrupted existence that follows perpetual succession, i.e., the partners might leave, but the business remains. A term of dissolution has to be mutually agreed on for the firm to dissolve.

FLEXIBLE AGREEMENT:

Transferring the ownership of LLP is also simple. A person can quickly be inducted in as a designated partner and the ownership switches to them.

SUITABLE FOR SMALL BUSINESS:

  • LLPs having a capital amount less than 25 lakhs and turnover below 40 lakhs per year do not require any formal audits. It makes registering as LLP beneficial for small businesses and startups.
  • An LLP can own or acquire property because it is recognized as a juristic person. Partners of LLP cannot claim the property as theirs.

NO OWNER/MANAGER DISTINCTION:

An LLP has partners, who own and manage the business. This is different from a private limited company, whose directors may be different from shareholders. For this reason, VCs do not invest in the LLP structure.

Quick and easy steps to register LLP in India - A detailed process


  • Arrange basic documents of Partners
  • Fill in an online form with accurate information
  • Apply for Digital Signature and DIN of Partners
  • Prepare all legal documents
  • Apply to name availability of the proposed LLP
  • Verification of all documents and forms by govt
  • File Incorporation Docs with ROC
  • Get LLP Incorporation Certificate
  • Drafting of LLP Agreement
  • Filing of LLP Agreement

STEP 1: OBTAINING DSC AND DIN

The first step is to obtain DSC of the desired partners of the Limited Liability Partnership. The reason for this is that all the forms need to be submitted online and require the directors' digital signatures.
The law also requires that all directors file for a DIN number. The application has to be made in Form DIR- 3.

STEP 2: APPLICATION FOR NAME APPROVAL

This process involves registering the LLP. Before you do this, you would need to see if the name is already taken. You can check on the free search facility on the MCA portal. The registrar only approves LLP names that are not taken before.

STEP 3: LLP AGREEMENT

LLP agreement is very crucial in a limited liability partnership as it determines the mutual rights and duties amongst the partners, and between the LLP and the partners. The partners enter into the LLP agreement upon the LLP registration by filing form 3 online on the MCA portal. This procedure has to be done within 30 days of the date of incorporation.

STEP 4: LLP INCORPORATION CERTIFICATE

Once the registrar approves your MOA and AOA, you’re steps closer to getting your LLP registered. The next step is to get the LLP Incorporation Certificate. You can do by submitting all documents to the registrar. The time frame is between 2- 12 days. Once you get your LLP Incorporation Certificate, you’re ready to go.

STEP 5: APPLY FOR PAN & TAN & BANK ACCOUNT

As soon as you get the incorporation certificate, you need to apply for your company PAN & TAN with the NSDL. The cost for this procedure is less than Rs.200 and it takes around three weeks to get done.

Documents required for LLP registration in India

The method of LLP registration in India does not require much legwork when it comes to documents.

TO BE SUBMITTED BY PARTNERS

  • Scanned copy of PAN Card or passport (Foreign Nationals & NRIs)
  • Scanned copy of Adhar Card/ Voter's ID/Passport/Driver's License
  • Scanned copy of Latest Bank Statement/Telephone or Mobile Bill/Electricity or Gas Bill
  • Scanned passport-sized photograph Specimen signature (blank document with signature [partners only])
  • Note: Any one of the partners must self-attest the first three documents. In the case of foreign nationals and NRIs, all the documents must be notarized (if currently in India or a non-Commonwealth country) or apostatized (if in a Commonwealth country).

FOR THE REGISTERED OFFICE

  • Scanned copy of latest bank statement/telephone or mobile bill/electricity or gas Bill
  • Scanned copy of Notarized Rental Agreement in English
  • Scanned copy of No-objection Certificate from the property owner
  • Scanned copy of Sale Deed/Property Deed in English (in case of owned property)

    • Note: Your registered office need not be a commercial space; it can be your residence, too.

Check if your firm qualifies for LLP in India

For any form of business, certain specific requirements must be fulfilled to be eligible for registering as an LLP
Any business who has:
  • A minimum of two partners. There is no limit to the maximum number of partners
  • The nomination of a natural person, if a body corporate is a Partner
  • No shared capital requirement, though each partner has to contribute towards it.
  • Minimum capital contribution: There is no minimum capital requirement for an LLP (or a company, for that matter). The LLP should have an authorized capital of at least Rs. 1 lakh.
  • At least one Designated Partner as an Indian resident
  • DPIN (Director Identification Number) for all Partners
  • DSC (Digital Signature Certificate) for all the Designated Partners
  • Address proof for the office of LLP. The registered office of an LLP does not have to be a commercial space. Even a rented home can be the registered office, so long as an NoC is obtained from the landlord.

Factors to Consider While Selecting an LLP Name

The Registrar of Companies (RoC) has issued naming guidelines for LLPs. It is essential that you follow the rules closely or your application may end up getting rejected, leading to a much longer process.

UNIQUE COMPONENT:

In AlphaBeta Internet Private Limited, AlphaBeta is the unique component. Now, once taken, the name will not be given to any other business in categories related to the Internet.

BLACKLIST:

Abbreviations, adjectives and generic words are rejected. So XYZ would be rejected, as would Good Quality Biscuits. The words bank, exchange and stock exchange, unless approved by RBI or SEBI, would also be rejected.

NO COMMON TRADEMARK:

There should not be a registered trademark by the same name on the IP India website. If there is one, the name can only be approved if you are able to get a No-Objection Certificate from its owner authorising you to use it.

DESCRIPTIVE COMPONENT:

In Biocon Research Private Limited, the word 'Research' describes the business the company is into. You cannot have 'Research' in your name if you're, say, in the logistics or restaurant business.

Check LLP Name Availability

Naming an LLP is often a time-consuming process as the government has put together a complicated procedure with several rules. Lucky for you Vakilsearch has built an easy-to-use tool to ensure you’re not hassled just for finding a name.

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