Limited Liability Partnership

1. A minimum of two partners are required.

2. The Digital Signature Certificate for all designated partners.

3. DPIN for all designated Partners.

4. The name of the LLP should not be similar to the name of any existing LLP or Trademark registration.

5. The name of the LLP should not be similar to the name of any existing LLP or Trademark registration.

6. Capital contribution by the Partners of the LLP.

7. Proof of registered office of the LLP.

For registering an LLP in India following documents are required. For the Partners:

1. PAN card

2. Passport (In case the applicant is a foreigner)

3. Driving license or Aadhar card, resident card or voter card, or any other identity proof issued by the government.

4. Latest Bank Statement or telephone bill.

5. Address Proof of Principle Place of Business

6. NOC from the Owner in case the registered place of business is rented.

7. Proof of evidence of any utility services like gas, electricity, telephone depicting the address of the premises bearing the name of the owner not older than two month.

1. First all partners need to apply for digital signature certificate (DSC).

2. The next step to incorporate Limited liability partnership (LLP) is reserving of LLP name. Applicant has to file eForm 1, for ascertaining the availability and reservation of the name of a LLP business.

3. After reserving a name, applicant has to file eForm 2 for incorporating a new Limited Liability Partnership (LLP).

4. EForm 2 contains the details of LLP proposed to be incorporated, partners’/ designated partners’ details and consent of the partners/ designated partners to act as partners/ designated partners.

5. Execution of LLP Agreement is mandatory as per Section 23 of the Act. LLP Agreement is needed to be filed with the registrar of companies in eForm 3 within the 30 days of incorporation of LLP.

There are many reasons why people opt for LLP registration in India over Private Limited Company incorporation. Following are some given advantages of LLPs:

• The cost of incorporating an LLP in India is comparatively lower than that of incorporating a public limited company or a private limited company.

• An LLP provides flexibility without imposing detailed legal & regimented requirements.

• An LLP enables professional and technical expertise and initiative to integrate with financial risk taking capacity in a creative and productive manner.

• As an LLP can be formed with the least possible capital, there is no set minimum capital limit requirement in the incorporation of an LLP.

• An LLP needs a minimum of 2 partners but there is no upper limit on the maximum number of partners. Whereas in a private limited company one cannot have more than 200 members.

• Whether the company is public or private irrespective of their share capital, is required to get its account audited. But here in the case of LLPs, there is no such mandatory requirement and this is considered to be one of the crucial compliance benefits of forming an LLP. A Limited liability company is obliged to get its audit done only in two cases. When the contribution of LLPs exceeds over Rs. 25 lakh, or when the annual turnover of LLPs exceeds over Rs. 40 lakh.

• LLP is liable for payment of income tax but the share of the partner is not liable to taxation. Thus, there is no liability to pay Dividend Distribution Tax (DDT).

The main purpose of commencing LLP in India is to introduce a form of business that provides limited liability to the owners and is comparatively easy to manage and stress-free. It is an alternative to Partnership firms. Below given are some major differences between an LLP and a partnership firm.

1. LIMITED LIABILITY

   In an LLP the partners are not accountable to the creditors externally. Hence, the partners are only liable to the extent of their contribution to the LLP. On the other hand, in the case of a partnership firm the partners are personally responsible to the creditors. In an LLP the partners get the benefits of limited liability protection.

2. NUMBER OF PARTNERS

   LLP and partnership firms both require having a minimum of 2 partners. However, there is no maximum limit in the number of partners in an LLP. And in case if the number of partners reduces below 2 in a partnership firm due for any reason the firm would get dissolved. Whereas in the case of LLPs if the number of partners get reduced from 2, the remaining partner can appoint a new partner without actually dissolving the LLP.

3. CENTRAL VS. STATE GOVERNMENT

   An LLP can change its registered office and open a bank account anywhere in India as it is registered under the Ministry of Corporate Affairs of India.
   The Registrar of firms that registers the partnership firms is regulated by the state government. Hence, it is more tiresome to operate or move across India with Partnership firms.

4. PERPETUAL EXISTENCE

   The life of LLP does not depend on its partners. The partners of the LLP can change from time to time, but that will not affect the existence, or operations of the LLP.
   In the case of a Partnership firm, the resignation or death of any partner would have immense effect and the Partnership would have to be redeveloped.

5. MEMBERSHIP

   In LLP number of members can be added during incorporation or post incorporation. The following can be the partners in LLP:

   • Individuals

   • Limited liability partnership

   • Companies

   • Foreign Limited Liability partnership

   • Foreign Companies

6. AGREEMENT

   The LLP agreement must be bring into effects and filed within 30 days of incorporation of an LLP. If in any case the LLP fails to file the agreement, then there is no agreement and the First Schedule of the LLP Act will administrate the relationship between the Partners and LLP.
   In case there is written agreement and no detailed declaration about any of the matters dealt with in the first schedule, such matters will be regulated by the first schedule.

Traders starting a new business are always eager to know the difference between a Private Limited Company and an LLP, as both of them have similar features.

• REGISTRATION PROCESS:

  The process for Private Limited Company and LLP Registration are very similar with some few differences in the documents and the forms that are filed for incorporation.
  Following are the steps involved for the incorporation of a Private Limited Company as and an LLP.

  • Acquiring the Digital signature certificates (DSC) for the proposed Directors

  • Obtaining the Director Identification number (DIN) for the proposed Directors

  • Obtaining the name approval from the MCA.

  • Filing for Incorporation

  Both LLP and Private Limited companies are registered with the Ministry of Corporate affairs under Central Government. The process time for incorporation of both Private and public limited companies takes about 15-20 working days.

• COST OF REGISTRATION:

  The LLPs have been designed to meet the needs of small businesses and hence, the incorporation fee for an LLP is comparatively less costly than that of a Private Limited Company. LLP registration requires a less number of documents that need to be printed on Non-Judicial stamp paper as compared to the Private Limited Company Registration.

• FEATURES:

  Similar features are offered by LLP and Private Limited Company. Both being separate legal entities have assets and liabilities that are separate from its promoters. Even though both LLP and Private Limited companies are transferrable, a Private Limited Company has more flexibility when it comes to transferring or sharing ownerships. Unless closed by the promoters or by a capable authority both Private Limited Company and LLP have a perpetual life.

• OWNERSHIP:

  In LLP the partners hold the ownership as well as the powers to manage and control the LLP. Therefore, a Partner in LLP will play a very vital role as he will act as both owner as well as a manager. In other hand, flexibility is offered to the promoters by a Private Limited Company when it comes to ownership.

• COMPLIANCE:

  For LLP and Private Limited Company the Tax Compliances are similar. LLPs have several advantages when it comes to Compliances relevant to the Ministry of Corporate affairs. An LLP does not need to have its account audited if the annual turnover of the LLP is less than Rs. 40 lakh and the capital contribution does not exceed Rs. 25 lakh. An LLP would however have to file LLP Form 8 and LLP form.
  On the other hand, a Private Limited Company would have to file an annual return with the Ministry of Corporate Affairs each year.

Post amendments to FDI regulation on 10th, November 2015, 100% FDI is now permitted the automatic route. 100% FDI is allowed in sectors and activities where 100% FDI is allowed and there are no FDI-linked performance conditions. Hence, foreign nationals can now start or invest in LLP.

Government approval was needed before 2015 for investments in LLP by NRIs and foreign nationals. Thus, the process of LLP incorporation by NRIs and foreign nationals was unmanageable and expensive. So, the NRIs and foreign nationals preferred company registrations over LLP. But now, with the relaxation of FDI norms the NRIs and foreign nationals can easily register their LLPs.

Following are the annual compliances for an LLP.

• INCOME TAX RETURN:

  Income tax return using form ITR 5 must be filed by the LLPs. Form ITR 5 can be filed online through the income tax website signing with the digital signatures of the designated partner.

• ROC ANNUAL RETURN:

  The LLP Form 11 should is due on or before the 30th of May each year. Form 11 contains the details of the total number of partners, total contribution made by all partners, details of body corporate as partners, and summary of all the partners. Along with this Form 8 must be filed within 30 days from the end of the 6 months of the respective financial year along with some specified fees. Therefore, LLP form 8 must be filed before the 30th of October of each financial year.
  
  In addition to this, GST registration, GST return filing, and TDS return filing would be required for the LLP based on the sales and turnover.