What is a Limited Liability Partnership (LLP)?
The concept of Limited Liability Partnership (LLP) was introduced in 2008 and has quickly become a popular legal structure for businesses. A “Limited Liability Partnership” means a partnership formed and registered under the Limited Liability Partnership Act, 2008. It limits the liabilities of its partners to their contributions to the business and also, offers each partner protection from the negligence, misdeeds or incompetence of the other partners.
What are the salient features of an LLP?
Advantages of an LLP
- Separate legal entity;
- Limited liability of partners;
- Perpetual succession;
- Change in partners shall not affect the existence, rights or liabilities of the LLP;
- The provisions of the Indian Partnership Act, 1932 shall not apply to an LLP;
- Any individual or body corporate may become a partner in an LLP.
- An LLP is cheaper to incorporate as compared to a Private Limited Company;
- It requires comparatively lesser compliances as against the statutory compliances under the Companies Act, 2013 for the Companies;
- It can be a smart choice from a tax perspective. For example, Dividend Distribution Tax and tax surcharge don't apply. Loans to partners are also not taxable as income, etc.
FAQs on Limited Liability Partnerships
1. What are the documents required for registration of an LLP?
- Less capital contribution as compared to a Company;
- Less management and innovative skills of the firm as compared to a Company;
- Lack of venture capital.
Following documents are required for incorporation of an LLP:-
- Digital signatures of the designated partners;
- Designated Partner Identification Number (DPIN) for the designated partners;
- Scanned copy of PAN Card or Passport (Foreign Nationals & NRIs)
- Scanned copy of 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])
- LLP Agreement;
- Affidavits as required under the provisions of the LLP Act, 2008;
- Scanned copy of Sale Deed/Property Deed in English (in case of owned property);
- Telephone or Mobile Bill/Electricity or Gas Bill
- Notarized Rental Agreement
- No objection Certificate from the owner of the premises.
Note: Any one of the partners must self-attest the first three documents. In case of foreign nationals and NRIs, all the documents must be notarized (if currently in India or a non-Commonwealth country) or apostilled (if in a Commonwealth country).
2. Who can become a designated partner in an LLP?
Any individual, or even a company or an LLP, can become a partner. However, only an individual can become a ‘designated partner’ in an LLP.
3. Can an NRI start up an LLP in India?
Yes, non-resident Indians and foreign nationals who are willing to enter into an LLP partnership can do so, provided they submit the necessary documents after getting it notarized by the concerned authorities. However, at least one of the designated partners in an LLP should be an Indian national.
4. What is an LLP agreement?
"Limited liability partnership agreement" means any written agreement between the partners of LLP or between the LLP and its partners which determines the mutual rights and duties of the partners and their rights and duties in relation to that LLP.
5. What is the minimum number of partners required to start LLP?
According to the LLP Act, 2008, a minimum of two designated partners are required to incorporate an LLP. The designated partners are responsible for fulfilling all the essential requirements involved in starting and running an LLP.
6. What kind of start-ups commonly registers LLPs?
Generally, only start-ups that will not be looking for venture capital funding register LLPs. This is because venture capitalists only invest in private and public limited companies.
7. Is it cheaper to run an LLP than a private limited company?
Yes, it is much cheaper to run an LLP than a private limited company, particularly in the early start-up stage. LLPs are required to have its accounts audited by a practicing Chartered Accountant if its annual turnover, in any financial year exceeds Rs.40 lakhs or its contribution exceeds Rs.25 lakhs. In addition, various statutory forms as required for a Company are not applicable to LLPs.
- Our organization will guide you to obtain DSC and DPIN which are the first and the foremost requirements for incorporating an LLP.
- Our experts will further guide you to choose a distinctive name (including trademark, if any) for the proposed LLP.
- Our experts will do the requisite documentation such as the LLP Agreement and the Affidavits, as required under the incorporation procedure as laid down under the LLP Act, 2008 and the rules made thereunder.
- Our team will file all the requisite forms/ documents for incorporation with the Registrar of Companies and will follow up the status of the certificate of incorporation.
- On incorporation of the LLP, our team members will guide and assist you to ensure statutory compliances and also to obtain PAN/ TAN in the name of the LLP.
- Our team members will further guide you as to what registration(s) you need to take, whether service tax, VAT, import/export code, etc. along with the documents related thereto.
- Our experts will offer their complete support for future statutory/ business related compliances.