Due to the fact that it incorporates the benefits of both partnership firms and companies, Limited Liability Partnerships (LLPs) have become a popular form of organization among entrepreneurs.
A Limited Liability Partnership (LLP) was established in India in 2008. The Limited Liability Partnership Act, 2008 regulates LLPs in India. An LLP must consist of at least two partners in order to be incorporated. There is, however, no upper limit on the maximum number of partners of an LLP.
There should be at least two individuals designated as designated partners among the partners, with at least one resident in India. LLP agreements determine the rights and duties of designated partners. All provisions of the LLP Act, 2008, as well as the provisions stipulated in the LLP agreement must be followed by them directly.
LLP Features
- Like companies, it has its own legal entity.
- Partners are only liable for their contributions.
- Creating an LLP is not expensive.
- Regulations and compliance are less important.
- It is not necessary to contribute a minimum amount of capital.
A minimum of two partners must be present to form an LLP Company. The maximum number of partners of an LLP is unlimited. Among the partners, there should be at least two designated partners, one of whom must reside in India.
LLP Company agreements define the rights and responsibilities of designated partners. They are directly responsible for complying with the provisions of the LLP Act 2008 as well as the provisions specified in the agreement.
A Limited Liability Partnership must be registered under the Limited Liability Partnership Act, 2008 if you want to start a business with one.
| Name of the form | The form’s purpose |
| RESERVE UNDER UNIQUE NAME-Limited Liability Partnership) | LLP name reservation form |
| FiLLiP | Form for incorporation of a limited liability company |
| Form 5 | Change of name notice |
| Form 17 | Transforming a firm into a LLP: Application and statement |
| Form 18 | Conversion of private companies/nonlisted public companies to limited liability partnerships |
LLP’s Advantages
It is a separate legal entity
Just like a company, an LLP is a separate legal entity. The LLP is distinct from its partners and has the authority to sue or be sued in its own name. By signing contracts under the LLP’s name, the LLP gains the trust of a variety of stakeholders and gives customers and suppliers a sense of trust.
Partners are limited in their liability
Limited liability applies to partners of an LLP. Their liability is limited to the amount of contributions they make. Therefore, they are not personally liable for losses in the business other than the amount of contributions they made. A company that becomes insolvent during the winding up process is liable only for its assets to clear its debts. The partners are free to operate as credible businessmen without any personal liabilities.
Less compliance and lower costs
In contrast to incorporating a public or private limited company, forming an LLP is considerably less expensive. LLPs are also subject to fewer compliance requirements, since they are required to file two statements annually, namely an Annual Return and a Statement of Accounts.
Capital contribution is not required
The LLP can be formed without any minimum capital requirement. There is no need to have a minimum paid-up capital before going for incorporation. The partners can contribute whatever capital they wish.
LLP’s disadvantages
Penalties for non-compliance
A minimal amount of compliance is required for LLP. However, if these compliances are not completed on time, LLPs will be penalized heavily. A limited liability company is required to file returns with the Ministry of Corporate Affairs (MCA) each year, even if it does not conduct any activity. A heavy penalty will be imposed if it fails to do so.
Dissolution of LLP and winding up
For an LLP to be formed, two partners must participate. If this number is below two for six months, the LLP will be dissolved. If the LLP is unable to pay its debts, it may be dissolved.
Raising capital can be difficult
LLPs do not have equity or shareholders as companies do. Angel investors and venture capitalists cannot become shareholders in an LLP since shareholders have to be partners and take on all of the responsibilities of a partner. This makes it difficult for LLPs to raise capital because angel investors and venture capitalists prefer to invest in companies rather than LLPs.
Process of LLP Registration
Step 1: Get a Digital Signature Certificate (DSC)
A digital signature of the designated partners of the proposed LLP is required before you can start the registration process. In order to obtain a digital signature certificate, the designated partner must obtain it from a government recognized certifying agency as all forms of LLP are filed online.
A list of such certified agencies is provided below. The cost of obtaining a DSC varies according to the certifying agency. You should obtain a class 3 DSC as well as a DIN. Partnership company and receive up to two DINs included in your plan, so you don’t need to apply separately.
Step 2: Obtain a Director Identification Number (DIN)
It is necessary to request the DIN for all members or intended members of the proposed LLP. The DIN application must be submitted on Form DIR-3.
To complete the application, you must attach scanned copies of documents (usually Aadhaar and PAN). Company Secretary, who is a full-time employee of the company or Managing Director, Director, CEO, or CFO of the company where the applicant is to be appointed as a director, must sign the form.
Step 3: Approval of the name
For the reservation of the name of the proposed limited liability partnership, the LLP-RUN form is filed with the Central Registration Centre under Non-STP, which will be processed by the Central Registration Centre. However, it is recommended that you search for the name on the MCA portal before quoting it in the form.
Based on the search criteria filled in, the system will provide names that are similar to those of existing companies/LLPs, so that you can choose names that aren’t the same as those of existing companies. Names will only be approved by the registrar if they do not resemble any existing partnership firm, an LLP, a body corporate, or a trademark in the opinion of the Central Government.
Fees must be submitted with the RUN-LLP form as per Annexure ‘A’, which may be approved or rejected by the registrar. A resubmission of the form shall be allowed within 15 days for rectifying the defects. There is provision to provide for two proposed names for the LLP.
Step 4: Establishing the LLP
- A form called FiLLiP (Form for Incorporating Limited Liability Partnerships) is used for LLP incorporation, which is filed with the Registrar that has jurisdiction over the state where the registered office of the company is located. This is an integrated form.
- Annexure ‘A’ lists the fees to be paid.
- A designated partner who does not already possess a DPIN or DIN may also use this form to apply for one if he or she does not possess a DPIN or DIN.
- Only two individuals may apply for an allotment.
- FiLLiP can also be used to apply for a reservation.
- This reserved and approved name will be filled as the proposed name for the LLP if the name was approved.
Step 5: File your Limited Liability Partnership (LLP) agreement
Partner rights and obligations are defined by the LLP company Registration between partners and between the LLP and its partners.
- LLP agreements must be filed online through the MCA Portal in form 3.
- Incorporated LLPs must file Form 3 within 30 days after being incorporated.
- In every state, Stamp Paper has a different value. The LLP Agreement must be printed on Stamp Paper.
Registration requirements for LLPs
A. Partners’ documents
- Partner’s PAN card/ ID proof – Every partner must provide their PAN card at the time of LLP registration. This serves as a primary proof of identity.
- Applicants may submit any one of the following documents to prove their address: Voter ID, Passport, Driver’s License, or Aadhar Card. Name and other details should be exactly the same on both address proofs and PAN cards. Prior to submitting to RoC, corrections should be made to address proofs, PAN cards, or the spelling of own name, father’s name, or date of birth.
- As proof of residency of partners, a recent bank statement, mobile bill, electricity bill or gas bill should be submitted. The statement or bill should not be older than 2-3 months and must contain the name of the partner as it appears in the PAN card.
- Partner’s passport size photo must also be provided, preferably on a white background.
- A foreign national or NRI must submit their passport compulsorily in order to become a partner in an Indian LLP. If the passport of a foreign national or NRI is notarized or apostilled by the appropriate authorities in their country, the Indian Embassy in that country can also sign it.
For foreign nationals or NRIs, two forms of proof of address are required. These are a driving license, bank statement, residence card, or any government-issued ID that includes the address.
It is also a requirement that an apostilled or notarized translation of the documents is attached if they are not in English.
B. LLP documents
- Proof of Registered Office: Evidence of registered office has to be submitted during incorporation or within 30 days after registration.
- In the case of LLPs renting registered offices, a lease agreement and a certificate of no objection must be submitted, confirming that the landlord consents to the LLP using the premises as a registered office.
- Furthermore, any utility bill from the past two months (gas, electric, or telephone) must be submitted. The bill should provide the entire address of the premise and the name of the owner, and should not be older than two months.
- As all documents and applications will be digitally signed by the signatory, one of the designated partners needs to have a digital signature certificate as well.
Checklist for the formation of a LLP
- Two partners are required.
- Each designated partner must submit a DSC.
- Each designated partner must have a DPIN.
- LLP’s name is unique and cannot be confused with any other LLP or trademark.
- LLP partners contribute capital.
- The partners have an LLP agreement.
- LLP registered office proof.
Registration costs for LLPs
The following is a list of government filing fees:
| Step | Cost |
| Step 1 – DSC | It costs around Rs. 1500-2000 for two partners (depends on the agency) |
| Step 2 – DIN | 1000 rupees for two partners |
| Step 3 – Name Reservation | 200 rupees |
| Step 4 – Incorporation | Contributions up to Rs. 1 lakh – Rs. 500, Contributions between Rs. 1 and 5 lakhs – Rs. 2000. |
| Step 5 – LLP Agreement | Depending on the capital contribution. Contribution up to Rs 1 lakh – Rs 50 for filling out Form 3 and stamp duty based on the state where LLP is formed |
Registration of an LLP takes time
LLP formation begins with the acquisition of DSC and ends with the filing of Form 3, subject to departmental approval and revert.
For more information on documents required for partnership registration click here. Let our experts manage your taxes and business compliances so you can focus on what you do best!
Frequently Asked Questions
Do LLPs have to be registered?
A Limited Liability Partnership (LLP) must be registered with the Ministry of Corporate Affairs (MCA) portal to be considered legally valid.
How do LLPs and partnership firms differ?
Under the LLP Act, an LLP must register in order to operate. According to the Partnership Act, 1932, registration of a partnership firm is voluntary. If a partner makes a contribution to an LLP, the liability of the partner is limited. A partnership firm, on the other hand, requires all partners to personally be responsible for the company’s losses/debts.
There is no separate legal entity for LLPs, so they can buy property, sue, and be sued in their name. Since the partnership firm does not have a separate legal entity, it can’t buy a property or sue anyone in its name. It must be in the name of the authorised partner.
LLPs require a Memorandum of Understanding and a Letter of Agreement?
A company registered under the Companies Act, 2013 needs to have a Memorandum of Association and Articles of Association. The LLP agreement governs the LLP, not the MOA and AOA. Hence, the LLP is not required to draft the MOA and AOA, just the LLP agreement.
Can an LLP appoint directors?
A limited liability company does not have directors. It does not have to appoint directors or have a board of directors. The partners govern an LLP. Consequently, an LLP must always have a minimum of two partners. The partners take decisions regarding the LLP’s workings and business.
What is DPIN?
In the same way as the Director Identification Number (DIN) of a company director, the Designated Partner Identification Number (DPIN) is issued by the MCA to the designated partner of an LLP. When registering an LLP, a person may obtain a DPIN, or he or she may apply for a DPIN to become a designated partner.
What are the qualifications for being appointed as a designated partner in an LLP?
All partners can be designated partners in an LLP if the LLP agreement allows it. A body corporate cannot be a designated partner. If a designated partner provision is in the LLP agreement, all partners can be designated partners.
LLPs can have any number of partners.
A person or corporate body can be a member of an LLP. However, minors, persons of unsound mind, and those who are insolvent cannot be members.
A limited liability company must have a certain number of designated partners.
There must be at least two designated partners in every limited liability company, at least one of whom should be an Indian national. Any partner can be a designated partner according to the LLP agreement if all partners are body corporates. At least two individual nominees of such body corporates should act as designated partners.
What happens if the number of partners in an LLP is reduced to one?
For a period of six months, a single partner of an LLP may carry on the business of the LLP if its number of partners has reduced to one at any time. After six months, if the LLP still has only one partner and that partner carries on the LLP’s business, that partner will be personally liable for the LLP’s obligations. When the number of partners of the LLP falls below two for more than six months, it can also be wound up by the National Company Law Tribunal.
Read more
India’s LLP Registration Process
Understanding the Role of a Designated Partner in an LLP
A Complete Guide to the Appointment of a Designated Partner in an LLP
