Starting up a new business in partnership is a great adventure; however, it is important to select the best structure for your partnership. In India, an LLP Registration has become one of the most common structures utilised to form a business due to its unique blend of flexibility and legal protections. This guide will help you on to form your own LLP and all aspects of forming one.
What is an LLP?
An LLP is a type of partnership where two or more persons are engaged in doing business together for mutual benefit and share profits and losses. Unlike with other partnerships, an LLP protects all partners' personal liability with respect to the debts of the LLP. Each partner is responsible only for their own actions in connection with the LLP, not for the actions of all other partners. An LLP offers the working advantages of a traditional partnership while at the same time affording partners the same type of legal protections as a corporation.
Why Use an LLP?
People are choosing to use LLPs instead of other types of businesses for various reasons. Some of these include:
1. Limited Liability: Limited Liability Partnership will ensure that the personal assets of both partners are not at risk in the event of any financial loss to the LLP (unless the LLP is being operated fraudulently).
2. Ease Of Formation & Management: In addition to being simple to register, there are very little administrative records for the LLP, and the formal requirements are much lower than that of a Private Limited Company.
3. No Minimum Capital: The minimum amount of capital required to form an LLP is only ₹10,000; therefore, a small financial commitment can start an LLP.
4. Separate Legal Identity: The LLP operates independently from its partners. An LLP can own property, enter into contracts, and continue its existence regardless of any partner's departure.
5. Tax Benefits: The partners of an LLP do not incur any taxes as a result of the LLP's profits, nor does the LLP incur any dividend distribution tax (DDT).
Requirements for Registration of an LLP in India
The following information must be provided to register an LLP in India.
- Digital Signature Certificate (DSC) will need to be obtained for all the partners in order for them to sign any online forms.
- The Director Identification Number (DIN) will have to be obtained by the designated partners.
- The name of the LLP has to be unique and cannot resemble any other business entity's name
- A registered office of the LLP is necessary.
- All partners will need to submit their Basic Identity and Address Proofs.
LLP Registration's Step-by-Step Process:
1. Apply for the Digital Signature.
In order for all the partners to sign online forms, they will have to have their own DSC’s.
2. Reserve the name of the LLP.
Select a name that has meaning (i.e., words which describe what the business does). The Reserved Name has to be filed with the Ministry of Corporate Affairs (MCA) for approval.
3. File the Incorporation Form.
The Incorporation Form requires information about each partner, the type of business being conducted, and the documentation to support the business's registered office.
4. Obtain the LLP Agreement.
The LLP Agreement is a contract between all partners that describes the roles, responsibilities, and rights of each partner in the LLP.
5. The LLP will receive a Certificate of Incorporation
MCA once the Registrars of Companies (ROCs) approve it.
Checklist of Documents Required
- PAN Card for each partner
- Any one of the following: Aadhaar Card, passport, or voter ID
- Proof of address (bank statement or utility bill)
- Two photographs of the partners
- Proof of registered office (rent agreement or ownership documents)
- No objection certificate from the landlord
- Cost and Timeline
The government fees associated with obtaining an LLP registration are quite reasonable. You can expect the following amounts:
Who Should Be An LLP?
LLP is suited to:
- Small & medium enterprises
- Businesses offering services (consultants, designers, IT services, etc.)
- Professionals (e.g., Chartered Accountants, Company Secretaries, lawyers, and architects)
- Any business where there are two or more partners, starting with low capital investment.
Conclusion
LLP registration should be considered if you want to protect yourself legally, have fewer compliance obligations, and be as flexible as possible in how you operate your business. To set up an LLP is straightforward and inexpensive; therefore, it is an excellent option for those companies looking to achieve maximum flexibility and security in their operations.
Professional services can help you with every aspect of registering an LLP. Our team will handle everything from securing a name to filing your LLP agreement, allowing you to concentrate fully on developing your business!
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