Limited Liability Partnership (LLP) REGISTRATION

Limited Liability Partnership (LLP) REGISTRATION

“Limited Liability Partnership (LLP) has become a preferred form of organization among entrepreneurs as it incorporates the benefits of both partnership firm and company into a single form of organisation.”

The concept of the Limited Liability Partnership (LLP) was introduced in India in 2008. An LLP has the characteristics of both the partnership firm and company. The Limited Liability Partnership Act, 2008 regulates the LLP in India. Minimum two partners are required to incorporate an LLP. However, there is no upper limit on the maximum number of partners of an LLP.

Advantages Of Limited Liability Partnership

• Separate legal entity: An LLP has a separate legal entity, just like companies. The LLP is distinct from its partners. An LLP can sue and be sued in its own name. The contracts are signed in the name of the LLP, which helps to gain the trust of various stakeholders and gives the customers and suppliers a sense of confidence in the business.
• Limited liability of the partners: The partners of the LLP have limited liability. The liability of the partners is limited to the contributions made by them. This means that they are liable to pay only the amount of contributions made by them and are not personally liable for any loss in the business. If an LLP becomes insolvent at the time of winding up, only the LLP assets are liable for clearing its debts. The partners have no personal liabilities, and thus they are free to operate as credible businessmen.
• Low cost and less compliance: The cost of forming an LLP is low compared to the cost of incorporating a public or private limited company. The compliances to be followed by the LLP are also low. The LLP needs to file only two statements annually, i.e., Annual Return and a Statement of Accounts and Solvency.
• No requirement of minimum capital contribution: The LLP can be formed without any minimum capital. There is no requirement of having a minimum paid-up capital before going for incorporation. It can be formed with any amount of capital contributed by the partners.

Disadvantages Of Limited Liability Partnership

• Penalty on non-compliance: The compliance that is to be followed by LLP is minimal. But, if these compliances are not completed on time, then the LLP will have to pay a heavy penalty. Even if the LLP does not have any activity in the year, it is required to file returns with the Ministry of Corporate Affairs (MCA) annually. If it fails to file the returns, then a heavy penalty will be imposed on the LLP.
• Winding up and dissolution of LLP: A minimum of two partners is required to form an LLP. If the minimum number of partners is below two for six months, then the LLP will be dissolved. It may be dissolved if the LLP is unable to pay its debts.
• Difficulty to raise capital: The LLP does not have the concept of equity or shareholders like a company. Angel investors and venture capitalists cannot invest in the LLP as shareholders. This is because the shareholders must be partners in the LLP and have to take up all the responsibilities of a partner. Thus, angel investors and venture capitalists prefer to invest in a company rather than an LLP making it difficult for the LLPs to raise capital.

Features of Limited Liability Partnership

• It has a separate legal entity just like companies.
• The liability of each partner is limited to the contribution made by the partner.
• The cost of forming an LLP is low.
• Less compliance and regulations.
• No requirement of minimum capital contribution.
• The minimum number of partners to incorporate an LLP is 2. There is no upper limit on the maximum number of partners of LLP. Among the partners, there should be a minimum of two designated partners who shall be individuals, and at least one of them should be resident in India.

The rights and duties of designated partners are governed by the LLP agreement. They are directly responsible for the compliance of all the provisions of the LLP Act 2008 and provisions specified in the LLP agreement.

If you want to start your business with a Limited Liability Partnership, then you must get it registered under the Limited Liability Partnership Act, 2008.

Documents Required for LLP Registration

The documents required to register your LLP are roughly the same as required for most business set-ups. However, there are two sets of documents that will need to be submitted for the LLP registration i.e. documents required of partners and the LLP documents.

Documents of Partners

• Identity proofs and PAN cards of all partners.
• Address Proofs of partners that include Voter ID, passport or driving license.
• A passport size photograph against a white background.
• Passports of NRIs and foreign nationals who wish to become partners in an LLP.

Documents of LLP

• A proof of the registered office of address needs to be submitted at the time of registration or within a time span of 30 days of the incorporation of the LLP. In case, the registered office is a rented facility, an NOC from the landlord is necessary. Additionally, at least one proof of residence will need to submit such as utility bills that are no older than 2 months.
• A Digital Signature Certificate (DSC)

Eligibility Criteria to obtain LLP Registration

• Minimum age required to start an LLP is 18 years, but a person below 18 years can become a member as well.
• Minimum two individuals are required to start an LLP.
• No maximum limit of partners.
• No minimum capital required to start an LLP except stamp duty.
• One person should be an Indian resident.
• Name uniqueness should be there for an LLP.
• Name should not be similar to an already existing company.

Process of Registration as New Limited Liability Partnership

Registering for an LLP is a relatively easy process that can be summed up in simple steps as mentioned below:

1. Step 1: Getting Digital Signature Certificate (DSC)
   The first step towards registering LLP is to acquire the digital signatures of all the designated partners of the LLP. A digital signature is required since the LLP’s documents are filed online. These documents carry digital signatures that further helps in obtaining certificate. Digital signatures required can be obtained from certified government agencies, such as National Informatics Center, IDRBT Certifying Authority, E-MUDHRA, CDAC and NSDL. The cost of acquiring a DSC will be according to the certifying agency that the applicant has applied for.
2. Step 2: Reserving the Name
   To register a proposed LLP, the applicant needs to get a Limited Liability Partnership-Reserve Unique Name (LLP-RUN) that can be processed at the Central Registration Centre. However, before citing or quoting the name, it is always advisable to check from the Ministry of Corporate Affairs (MCA) portal for a free name. This will provide a list of companies with the same or similar names to a proposed LLP. Once the name has been chosen, the registrar will approve the name that is not very similar to any existing LLP. The LLP-RUN will need to be submitted along with a fee that will then proceed for the approval of the registrar.
3. Step 3: Incorporation of LLP
   Form for incorporation of Limited Liability Partnership (FiLLiP) is required to be filled and submitted with the registrar for incorporation of LLP. Fees has to be paid as per Annexure ‘A’. Application for allotment shall be permitted to be made by 2 individuals only.
4. Step 4: File Limited Liability Partnership Agreement
   This agreement governs the mutual rights and duties amongst the partners. The agreement can be filed in form 3 online on MCA Portal. From the date of incorporation, Form 3 for LLP agreement has to be filed within 30 days. LLP Agreement has to be printed on Stamp Paper, wherein every state has their different stamp paper.

It takes approximately 15 days to get DSC and Form 3, subject to availability of all the documents.

FAQs on Limited Liability Partnership Registration

• Q. Is LLP registration mandatory?
  Ans. Yes, registration of an LLP on the Ministry of Corporate (MCA) portal is mandatory. An LLP must obtain registration under the Limited Liability Partnership (LLP) Act to be a legally valid entity.
• Q. How much time does it take to register as an LLP?
  Ans. The total time for registering an LLP is approximately 15 days.
• Q. How much does it cost to register as an LLP?
  Ans. Registering for an LLP costs from Rs. 2500 – Rs. 6000 depending on the number of partners and the capital contribution.
• Q. What are the restrictions in respect of minimum and maximum number of partners in an LLP?
  Ans. The minimum number of partners required to start an LLP is two and there is no limit to the maximum number. In case of partnership the minimum partners remains two, whereas the maximum can reach up to 50.
• Q. Whether a body corporate may be a partner of an LLP?
  Ans. Yes, an individual or a body corporate can be a partner of an LLP.
• Q. What are the qualifications for becoming a partner?
  Ans. Any individual who is literate and competent enough to contract can become a partner. No major qualifications are required.
• Q. What are the requirements in respect of “Designated Partners”?
  Ans. There should be at least 2 Designated Members to be appointed to form an LLP. Designated Partners are primarily accountable for regulatory and legal compliances, as well as responsible for their liability as ‘partners, per-se”.
• Q. Who can be a “Designated Partner”?
  Ans. Any 2 individuals who are resident of India, partners of LLP or nominees of bodies corporate are considered as Designated Partners.
• Q. How to reserve the name for a limited liability partnership?
  Ans. LLP name availability is an essential part for an online LLP registration. The name of LLP is reserved through a web based from named “LLP-RUN” (Reserve Unique Name). The partners can provide maximum of 2 names in preferential order to reserve any one. The registrar may ask to re-submit the application with different name, if name do not ball under criteria of uniqueness, relevancy or does not fulfill the necessary requirements.
• Q. Whether a place of office is required for online LLP registration?
  Ans. 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 the communication purpose by the MCA and other concerned authorities and is also published on its portal.
• Q. Who can become a partner in LLP?
  Ans. Any individual/organization can become the partner in an LLP including foreigners/NRI’s. However, an individual must be above 18 years and should have a valid PAN card.
• Q. Does LLP require MoA and AoA?
  Ans. No, the Memorandum of Association (MOA) and the Articles of Association (AOA) are important documents of a company registered under the Companies Act, 2013. The LLP agreement governs the LLP and not the MOA and AOA. Thus, an LLP does not have to draft the MOA and AOA. It has to draft the LLP agreement.