Limited Liability Partnership (LLP) is a term used to describe organisations that provides them with the benefits of a company (with limited liabilities) and the flexibility of partnership firms. Investors who want to play an active role in management prefer LLP registration, and a minimum of two partners is needed to apply for the LLP registration process. The duties and compliance requirements of LLP partners are mentioned in the agreement, and the consensus is that partners are responsible for provisions outlined by the LLP Act, 2008 and must honour the LLP agreement.
LLP registration provides multiple benefits to businesses, especially with taxation and compliance aspects in India. Dividend Distribution Tax (DDT) does not apply to entities that form an LLP partnership. There are many reasons why companies go for LLPs instead of being private limited companies.
Did you know?
LLP has no limitations when it comes to number of owners compared to private companies which are limited to a maximum of 200 shareholders.
Features and Benefits of Online LLP Registration
- Liabilities of the LLP partnership are limited to solely the terms and conditions of the LLP agreement.
- Expenses involved in starting an LLP partnership are minimal. The compliance and regulation requirements are also very low.
- There are no minimum requirements for capital contribution when forming partnerships.
- There are no limits on the number of business owners, which is different from private limited companies that have a partner capacity of a maximum of 200 members.
- A significant benefit is that no compulsory audits are needed for maintaining accounts. The only exception to this rule is only if LLP contributions exceed ₹25 lacs or if the maximum annual turnover of the business is more than ₹40 lacs.
- LLP partnership firms are liable to pay income tax; however, the partners' shares are not prone to taxation. 'Deemed dividend' provision does not apply to LLP partners according to Section 40 (b), and any interest paid to partners, bonuses, salary, or remunerations are approved under deductions.
- LLP partnerships have their legal entities. It is possible to get the trust of stakeholders since contracts are in their name, being distinct from their partners. There are only two financial statements that have to be filed manually - an annual return and a statement of accounts and solvency.
Also Read: Handy tips of drafting an LLP Agreement
How to Obtain LLP Company Registration?
LLP Formation Partnership is a new concept in India mostly aimed at small-scale businesses and medium-sized companies. An LLP partnership brings multiple benefits to businesses and is easier to maintain because of low compliance requirements. Low registration fees and an easy application are the top two reasons companies opt for this. Prior approval of the Reserve Bank of India (RBI) is needed to get an FDI approved for an LLP. FDI under LLP is done via a 100% automated route, and it is important to note that NRIs and Foreign National Promoters choose to set up a Private Limited Company instead of an LLP.
Below is a step-by-step overview of the LLP company registration process and how to get started.
Get the Digital Signature Certificate (DSC)
A digital signature certificate (DSC) is mandatory for every partner who wants to form an LLP agreement with each other. The only way to get a DSC is to sign all forms on an MCA portal digitally, and the charges for getting the DLC can vary from agency to agency. Generally, a Class 3 DSC Certificate is required for registering a Limited Liability Partnership with a company, and only government-recognized certifying agencies issue the certificate.
Once partners acquire the DSC, they have to fill up Form DIR-3 and attach a copy of their proof of identity and residence along with it.
Apply for Director Identification Number (DIN)
The application process for obtaining the Director Identification Number begins with submitting the DIR-3 form. It is the next step, and individuals have to submit a scanned copy of their Aadhar card and PAN documents. The form also needs to be signed by a CEO/CFO/Director or managing director.
The Central Registration Center processes names for Limited Liability Partnerships under non-STP. There is a free name search option on the MCA portal that will let you see if a name for your LLP agreement has already been taken or not. Make sure you pick a unique name since similar names get rejected by the registrar. If any mistakes are made during the name registration process, a re-submission of the form is allowed as long as it is within 15 days. The provision for name registration says that at least two names are allowed for review and approval. You need the form RUN-LLP for the name approval by the Central Government.
Approved partners will be sent a letter of approval once the MCA has accepted the names. Partners will have up to 60 days to file their LLP incorporation and register the LLP after that. A signed subscriber's sheet has to be filed to the MCA to do the LLP registration. Documents showing possession of a registered office need to be submitted to the registrar to obtain the incorporation certificate.
The Form for Incorporation of Limited Liability Partnership (FiLLiP) is filed with the registrar and used for incorporating new LLP partnerships. It's an integrated form, and the fees are to be paid as per Annexure 'A.' Partners designated under the LLP agreement need to obtain a DPIN number or DIN. The name reservation process is done using the FiLLiP, and approved names are filed as proposed names for the LLP.
Once the registrar issues the incorporation certificate, partners will get 30 days to file the Partnership Deed with the MCA. If they don't do it within that period, a fine will apply.
Filing of the Limited Liability Partnership (LLP) Agreement
The LLP mutual agreement has to be filed online on the MCA portal. Form 3 has to be filed within 30 days from the date of incorporation. The LLP agreement must be printed on stamp paper, and charges for this vary from state to state.
Documents Required for LLP Registration
Proof of registered address has to be submitted during the LLP Registration process. If the LLP partners use a rented space to carry out business operations, they must obtain a No Objection Certificate from the landlord and furnish proof of rental agreement.
Besides these documents, other proofs such as telephone bills, utilities, and gas bills must be submitted. All these bills should show the residence address of the office and must not date more than two months.
Now that you know the steps needed to do an LLP formation, you can proceed with the registration and application process. An LLP partnership can prove to be beneficial for entrepreneurs, small business owners, and enterprises who are engaged in providing any kind of services and commercially popular products.
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