Limited Liability Partnership
When you want the flexibility of a partnership with the benefits of a Limited Liability structure, the best solution is a Limited Liability Partnership. At Ease of Business (EOB), we help you set this up with efficient and hassle free services through our experts.
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Limited Liability Partnership
When you want the flexibility of a partnership with the benefits of a Limited Liability structure, the best solution is a Limited Liability Partnership. The LLP is a separate legal entity, is liable to the full extent of its assets but liability of the partners is limited to their agreed contribution in the LLP. It is a popular choice for services and professional firms.
Both LLP and Private Limited Company offer many of the same features. LLP and
Private Limited Company are both separate legal entities and have assets and
liabilities that are separate from that of the promoters. LLP and Private Limited Company are both transferable, though a Private Limited Company offers more flexibility when it comes to transferring or sharing of ownership. LLP and Private Limited Company both have perennial life, unless and otherwise closed by the promoters or a competent authority.
LLP is a separate legal entity registered under the LLP Act, 2008. The partners of a LLP are not personally liable for the liabilities of the LLP. Partners have limited liability and is liable only to the extent of their contribution to the LLP.
Private Limited Company is a separate legal entity registered under the Companies Act, 2013. The Directors and Shareholders of a Private Limited Company are not personally liable for the liabilities of the Company. Shareholders have limited liability and is liable only to the extent of their share capital.
ADVANTAGES
Some of the benefits of Limited Liability Partnership
The advantages of LLP in India are much as it is a newly growing business structure. LLP is a new concept while Partnership is an old concept. LLP and Partnership are different as Partnership is an old concept while LLP is a newly established concept introduced in India by Limited Liability Partnership Act, 2008.
It is easy to start and manage a business like entrepreneurs. With few compliance procedures, annual meetings or resolutions unlike a Pvt Ltd.
Like a partnership firm an LLP can be started with the minimum amount of capital money. Similarly, the capital may be in the form of tangible, movable asset like Land, machinery or intangible form.
There is no limit for partners in LLP. An LLP requires a minimum 2 partners while there is no limit on the maximum number of partners in contrast to a private company wherein there is a restriction of not having more than 200 members.
The cost of registration of LLP is low as compared to any other company. It comes with a lot of flexibility to set up and run your business.
Registration of LLP creates a separate legal identity than its partners. Governed by the LLP Act of 2008, it allows the business to contract with other entities, take legal action, own assets and borrow funds in the name of an LLP itself. It is a major advantage that is not available to a regular partnership firm.
LLP have to face less compliance burden as they have to submit only two statements i.e. the Annual Return & Statement of Accounts and Solvency.
LLP is not liable to pay the tax on the income and share of its partner. Thus, no dividend distribution tax is payable as under section 40(b). Bonus, commission or remuneration, Interest to partners, any payment of salary, allowed as deduction. Provision of ‘deemed dividend’ under income tax law, is not applicable to LLP.
If the partners of LLP withdraw profits from the company, an additional tax liability in the form of DDT is not payable by partners. Hence, profit of LLP can be easily withdrawn by the partners.
ONLINE REGISTRATION
Documents required to register a Limited Liability Partnership
Formation of Company Name
Unique Name
Mainly it builds the company brand and should preferably be a coined word
Business Object
The second part of the name should suggest the business activity of the company
Constitution Type
Name of the company must end with “Private Limited” as a suffix
THE PROCEDURE
Company Registration Process in India
There are a series of steps before the company formation is completed. They are listed below for easy reference. The entire procedure takes 10 to 12 working days to complete (Based on standard government processing time).
- Application for Digital Signature Certificate
- Checking LLP Name availability
- Application for Name Reservation under “LLP-RUN” & Reservation of the LLP Name
- Drafting the LLP incorporation document
- Filing application for LLP registration
- Application for DIN allotment of Designated Partners
- Certificate of LLP Incorporation
- Application for PAN and TAN of LLP
- Drafting of LLP Agreement
- Payment of Stamp Duty
- Filing of LLP Agreement
- Government processing time
FREQUENTLY ASKED QUESTIONS
Explore Private Limited Company Registration
What is the minimum capital requirement for LLP registration in India?
No. There is no minimum amount prescribed to form an LLP in India. It can be started with any amount of capital demanded by the business. Although there is no minimum requirement, every partner must make a contribution financially to form LLP. The amount of capital contribution is disclosed in the LLP Agreement and amount of stamp duty is decided by the total contribution amount.
Can an existing company be converted to LLP?
Yes, any existing private company or existing unlisted public company can be converted into LLP by complying with the Provisions of clause 58 and Schedule III and IV of the LLP Act. Form 18 needs to be filed with the registrar along with Form 2 for such conversion.
What will be the obligation of a partner in case he changes his name or address?
Every partner shall inform the LLP of any change in his name or address within a period of fifteen days of such change. The LLP, in turn, would be under obligation to file such details with the Registrar within thirty days of such change in Form 4.
What is the process for intimation of changes in the partner’s details?
The change in partner’s details can be intimated by filing eform 4 within thirty days of such change without additional fee and with additional fee thereafter.
Is Foreign Direct Investment (FDI) allowed in LLP?
Yes, Foreign Direct Investment (FDI) is allowed in LLP under the automatic route in the sectors allowed by the Foreign Investments Promotion Board (FIPB). However, Foreign Institutional Investors (Flls) and Foreign Venture Capital Investors (FVCIs) will not be permitted to invest in LLPs. LLPs will also not be permitted to avail External Commercial Borrowings (ECB.)
Is an audit mandatory for LLPs registered in India?
Statutory audit in case of LLP registration depends on the turnover and contribution of the LLP. If the LLP turnover exceeds ₹ 40 lacs and/or the capital contribution exceeds ₹ 25 lacs, the financial statements must be audited by an eligible statutory auditor.
Is a place of business required for online LLP Registration?
Yes, the partners must provide a place of business in India with the required list of documents. It can be both – a residential or commercial plot. In most cases, the address is used for communication purpose by the MCA and other concerned authorities and is also published on its portal.
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