Limited Liability Partnership (LLP) is an incorporated business entity that combines the features of Partnership and Company form of businesses. LLP registration in India is regulated by the Limited Liability Partnership (LLP) Act, 2008, and administered by the Ministry of Corporate Affairs (MCA). The main advantage of an LLP is one partner is not liable for another partner’s misconduct or negligence. The owners of a private limited company have limited liability to creditors. In case of default, banks/creditors can only sell the company’s assets and not the personal assets of directors.
Advantages of LLP:
- LLP has dual advantages; Company and a Partnership firm
- No partner will be responsible for other partner’s misconduct
- Cheaper to incorporate than a Private Limited Company
- Limits the liabilities of its partners
LLP is one of the easiest types of business to incorporate. It has many Advantages and also Disadvantages. With an easy incorporation process and simple compliance formalities, LLP attracts many professionals and Micro, Small & Medium Enterprises (MSME) but LLP cannot raise funds for equity.
According to Limited Liability Partnership Act 2008, a minimum of two partners is required to incorporate an LLP and there is no upper limit to it. At least one partner of the LLP must be a resident of India. All LLPs are governed according to the provisions of the Act and it also governs the rights, duties, and responsibilities of all the partners.
How to register Limited Liability Partnership (LLP):
A Limited Liability Partnership (LLP) needs at least 2 partners and it could be individuals, companies or LLPs. Partners are persons who own and manage the LLP. A partner of an LLP shall have two kinds of rights; management rights and profit rights. Here are the steps for register LLP in India.
1. Obtain Digital Signature Certificate (DSC):
Before beginning the process of registration, you must apply for the Digital Signature Certificate (DSC) of the designated partners. DSC is a legally recognized method of signing documents electronically under the Information Technology Act, 2000. A licensed Certifying Authority issues the Digital Signature Certificate. Certifying Authority means a person who has been granted a license to issue a digital signature certificate under Section 24 of the Indian IT-Act 2000. All the partners and Designated Partners of LLP should have a valid DSC for signing the documents electronically.
2. Apply for Designated Partner Identification Number (DPIN) or Director Identification Number (DIN):
All designated partners of the proposed LLP require DPIN or DIN. For this, you need to file e-form DIR-3. Then you have to attach the scanned copy of all the documents (usually Aadhaar Card and PAN Card) with this form. The form shall be signed by a Company Secretary/Chartered Accountant/Cost Accountant/Advocate in full-time employment of the company or by the Managing Director/Director/CEO/CFO of the existing company in which the applicant shall be appointed as a director. If in case any partner or partners have their DPIN or DIN, the same can be used.
3. Reservation & Approval of Name:
LLP-RUN (Limited Liability Partnership-Reserve Unique Name) is filed for the reservation of name of proposed LLP which shall be processed by the Central Registration Centre (CRC) under Non-STP and the approval of the name will be made by the Registrar only. But before doing this, it is recommended that you must conduct a free name search on the MCA portal. The system will confirm you whether the name already exists or not. It also provides the names closely resembling the existing LLP’s which is easier for you to choose the name for your LLP.
If the name is not undesirable in the opinion of the Central Government and does not resemble any existing partnership firm or an LLP or a body corporate or a trademark than only the Registrar will approve the name.
The form RUN-LLP has to be accompanied with fees as per Annexure ‘A’ which may be either approved/rejected by the registrar. A re-submission of the form shall be allowed to be made within 15 days for rectifying the defects. There is a provision to provide for 2 proposed names of the LLP.
4. Incorporation of LLP:
The form used for the Incorporation of LLP is FiLLiP (Form for incorporation of Limited Liability Partnership) which shall be filed with the Registrar who has control over the state in which the registered office of the LLP is situated. The form will be an integrated form. All the details filled in the form must be correct. A prescribed registration fee shall be paid. The form will be digitally signed by the partners who have DIN or DPIN and whose name in the incorporation document. It must also be digitally signed by anyone who is a Chartered Accountant, Company Secretary, Cost Accountant, and Advocate.
Once the form has been approved by the Registrar, you will receive an email regarding the same and the status of the form will get changed to Approved.
5. File LLP Agreement:
LLP agreement defines the mutual rights, duties, and responsibilities amongst the registered partners and also between the LLP and the registered partners. LLP agreement must be filed in Form 3 online on MCA Portal and that LLP Agreement has to be printed on Stamp Paper; the value of Stamp Paper will vary state to state. Make sure that Form 3 for the LLP agreement has to be filed within 30 days of the date of incorporation.
6. LLP Incorporation Certificate:
Once the registrar approves everything, now your LLP is ready to go. Your LLP has been formed and the name also gets registered. For getting the LLP Incorporation Certificate, you need to submit all documents to the registrar and you will get your LLP Incorporation Certificate.
Documents of Partners and Designated Partners:
- Identity Proof – PAN Card
- Address Proof – Aadhaar Card / Passport / Driving License / Voter Identity Card (Any one) or Telephone Bill / Mobile Bill Electricity Bill / Water Bill Bank Statement /Bank Passbook with latest transaction (Any one)
Documents of LLP:
- Digital Signature Certificate (DSC)
- Address Proof of Registered Office
Cost of incorporation of LLP in India: Below are the Government fees for filing forms for LLP:
Step 1 DSC: – Around ₹ 1500 to ₹ 2000 for 2 partners (varies depending on the agency)
Step 2 DPIN or DIN: – ₹ 1000 for 2 partners
Step 3 Name Reservation: – ₹ 500
Step 4 Incorporation: – Depends on capital contribution.
Contribution up to ₹ 1 Lakhs – ₹ 500
Contribution between ₹ 1 Lakh to ₹ 5 Lakhs – ₹ 2000
Contribution between ₹ 5 Lakh to ₹ 10 Lakhs – ₹ 4000
Contribution exceeds ₹ 10 Lakh – ₹ 5000
Step 5 LLP Agreement: – For filing Form 3; depends on capital contribution.
Contribution up to ₹ 1 Lakhs – ₹ 50
Contribution between ₹ 1 Lakh to ₹ 5 Lakhs – ₹ 100
Contribution between ₹ 5 Lakh to ₹ 10 Lakhs – ₹ 150
Contribution exceeds ₹ 10 Lakh – ₹ 200