The Limited Liability Partnership (LLP) was introduced in India after Jan 2009. The LLP structure was an immediate success with start-ups/skilled services companies. The LLP structure was introduced in India to create a business model that’s simple, to assist business owners by providing them with limited financial liability.
ADVANTAGES OF AN LLP
The most important reason for the registration of a firm as an LLP, is that the members of the LLP, are only responsible for the liabilities incurred by the said firm. This is completely different from regular partnership, wherever the non-public assets of the partners are attached to the debts, if the business goes bankrupt. The other advantages are mentioned below:
- An LLP will be a separate legal entity from the partners. Each partner can sue the other if such a case arises. An LLP has an uninterrupted existence that follows the concept of perpetual succession. This means if any of the partners leaves the LLP, the business will continue. A term of dissolution must be reciprocal in agreement between the partners for the LLP to dissolve
- The transfer of the LLP is straightforward. A new person can be inducted easily as a partner. Thus, the possession of the LLP goes to them
- An LLP that has a capital of twenty five lakhs and turnover below forty lakhs per annum don’t require any formal audits. This makes it perfect for small businesses and start-ups. An LLP can own or buy property as it’s recognized as a juristic person. But the partners of the LLP cannot claim the property as theirs
- An LLP has partners, who own and run the business. This is totally different from a private limited company, wherein the administrators are different from shareholders. This is one of the reasons, venture capitalists don’t invest in an LLP company.
QUICK STEPS TO REGISTER LLP IN INDIA
ACE ALLIANCE makes the process of LLP registration smooth and easy for you. The steps o register an LLP in India are mentioned below:
- The basic documents of all the partners in the LLP have to be submitted
- An online form with the correct information has to be filled up and completed
- An application has to made for the Digital Signature and DIN of all the Partners
- All the legal documents have to be prepared
- An application must be made to check the handiness of the planned LLP
- The verification of all documents and forms required by the government authorities
- One has to file Incorporation documents with ROC
- One needs to get the LLP Incorporation Certificate
- The LLP Agreement has to be drafted
- The LLP Agreement has to be filed
DETAILED STEPS TO REGISTER AN LLP IN INDIA
- The first step is to get the digital signature certificate (DSC) of the partners of an LLP. Since each of the forms have to be submitted on-line, one needs the directors digital signatures. The law additionally states that each partner file for a DIN range. This application has to be done in form DIR- 3
- Before registering the LLP one must check if the desired name is available on the MXA portal. The registrar only approves an LLP name that hasn’t been registered before
- The approval is made by the Registrar on the condition that the Central Government won’t find this name undesirable. The chosen name must not be similar to any of the prevailing partnership companies/LLPs/Trademarks/Body corporates
- The LLP agreement is an important document in a LLP. The agreement determines the rights and duties amongst the partners and the LLP. The partners get into an LLP agreement upon the LLP registration by filing an application on-line on the MCA portal. This process has to be done within thirty days of the date of incorporation.
- Once the registrar approves the LLP and the AOA, one is very close to getting the LLP registered. The next step is to complete the incorporation process of the LLP and get the certificate. After a person has submitted all the documents to the registrar it takes anywhere between 2-12 days to get the certificate.
REQUIREMENTS TO CREATE AN LLP
- Any business entity that comprises of at least two partners can form a LLP. There is no cap to the maximum number of partners within a LLP.
- The nomination of a natural person, even a body corporate is treated as a partner.
- There is no shared capital requirement, although each partner must make an agreed contribution towards the LLP.
- There is absolutely no minimum capital requirement for an LLP, but it should at the least have an authorized capital of INR.1 lakh.
- One of the designated partners in the LLP must be an Indian resident
- A DPIN is needed for all the partners
- A DSC (Digital signature certificate) is mandatory all the designated partners
- The address proof is mandatory for official office address of an LLP. However, the registered office of the LLP does not necessarily have to be a commercial office space. Even a rented home can serve as the registered office, as long as an NOC is provided by the landlord.
- In regards to changes as per FDI regulations dated November 10, 2015, foreign investors are now allowed to have 100% FDI automatically. The 100% FDI clause in an LLP is granted to foreign companies who work or operate in activities/sectors where 100% FDI is through the channels of the automatic route. There are also no performance pre-requisites that are linked to FDI. A definitive interpretation of terms such as ‘ internal accruals’ and ‘ownership and control’ has been given with reference to the LLP. Thus, foreign investment can be made smoother and quicker with this option of FDI in LLP.
- The LLPs are allowed to opt for downstream investment in a different organization/or can even choose an LLP in industries where 100% FDI is allowed in accordance with this automatic route. This again does not have any performance constraints that are FDI linked.
DOCUMENTS REQUIRED FOR AN LLP IN INDIA
- A scanned copy of the partners PAN Card or visa (Foreign Nationals and NRIs)
- A scanned copy of the partners Aadhar Card/ Voter’s ID/Passport/Driver’s License
- A scanned copy of the partner’s latest bank statement/telephone/mobile bill or electricity/gas bill
- A scanned passport-sized photograph of the partners with the specimen signature of the partners
- A scanned copy of the latest bank statement/telephone/mobile bill, or electricity or gas Bill of the premises where the LLP is being registered
- A scanned copy of the notarised rental agreement between the landlord and the LLP which is in English
- A scanned copy of No-objection certificate from the property owner
POINTS TO CONSIDER WHILE CHOOSING A NAME FOR AN LLP IN INDIA:
The Registrar of Companies (ROC) has given clear rules for LLPs in India. The guidelines one must adhere to are mentioned below
- REMARKABLE COMPONENT: In BetaLearn Internet Private Limited, BetaLearn is considered the remarkable part. Once this name is registered it won’t be given to any other business in the categories/classes identified with the Internet
- BOYCOTT: Any shortened forms/descriptions and nonexclusive words are always dismissed. For example ABC would be dismissed, as would Decent Type Wafers. The words bank/trade/stock trade unless endorsed by RBI or SEBI, also would be dismissed
- NO COMMON TRADEMARK: There shouldn’t be another brand name by a similar name on the IP India site. In the event there is a similar name, the name can only be used, if the applicant gets a No-Objection Certificate, from the original owner that gives the applicant approval to use it
- ENGAGING COMPONENT: In Horizzon Hotel Private Limited, the word “Hospitality” describes the business of the company. One can’t have ‘Hospitality’ in the name even though the company is in the business of hospitality
Our team of tax and legal experts at ACE ALLIANCE will help you with the whole process of registering your LLP. Our team will ensure and assist you with the whole compliance process and help complete this process in the shortest time possible. Our team will also help you with the following processes:
- Getting the DSC for one director and DIN for up to three directors
- The drafting of the Memorandum of Association (MOA) and Articles of Association (AOA)
- With the registration fees and stamp duty
- Drafting and creating your Company Incorporation Certificate
- Total support while you open your LLP’s current bank account
- Our team will keep on sending you timely updates on ROC compliances.
- We will provide you with online accounting software which is valid for one year.
RECENT UPDATES ABOUT LLP
01ST APRIL: MCA INTRODUCES LLP SETTLEMENT SCHEME
The Ministry of Corporate Affairs has introduced LLP Settlement Scheme. The scheme is to benefit defaulting LLPs for whom filing of belated documents (Form 3, Form 4, Form 8 and Form 11) is due till 31st August 2020. An additional fee, whatsoever, has been waived off. No proceedings and prosecution will be initiated by the Registrar against these LLPs if they complete the filing by 30th September 2020
27TH MAY: DELOITTE TOUCHE TOHMATSU INDIA LLP: TRANSACTION ADVISER OF GOVERNMENT
For the Indian Government’s strategic disinvestment process, Deloitte Touche Tohmatsu India LLP has been appointed as the transaction advisor.