Limited Liability Partnership
A blend of benefits of limited liability and flexibility of partnership which makes LLP form of business a corporate alternative to private limited company. Lower compliances and ability to raise funds from different sources along with ease of management makes this form of framework desirable among business owners.
A limited liability partnership is a constitution that has the legal capacity of a company and the flexibility of working as a partnership. The concept of LLP was introduced in India in the year 2008.There should be a minimum of two designated partners and there is no upper limit for the number of partners. Among the two designated partners, one should be a resident in India.
The process of registration of a Limited Liability Partnership:
Obtain the Digital Signature Certificate (DSC):
- The registration process of an LLP is done online and hence there is a requirement for the digital signatures of the designated partners.
- To apply for a digital signature the partners should possess a PAN number, passport size photo, identity proof and address proof.
Obtain the Designated Partner Identification Number (DPIN):
Form DIR-3 is submitted to obtain the following document. The Designated Partners Identification Number is allotted by the Registrar of Companies.
- The designated partners should submit their self-attested Aadhar and PAN card details along with Digital Signature Certificates and the DSCs of respective professionals engaged in the formation of the LLP.
Approval of name of the LLP
- The LLP’s name is procured by filing the form RUN-LLP (Reserve Unique Name – Limited Liability Partnership), which is uploaded to the MCA portal.
- Before submission, it is to be looked at with precision that the chosen name hasn’t been taken up earlier. This curbs the chance of the name being rejected.
- Two name options can be submitted along with the form. If at all the name is rejected, there is a second chance to submit two name options.
Incorporation of LLP
- Once the name is reserved, it is required to log on to the MCA portal and fill in Form 2- Incorporation document and Statement.
- A prescribed fee has to be given based on the monetary value of the proposed contributions of the partners of the LLP.
- The statement is to be signed using the Digital Signature Certificate of the designated partners and the professionals who are engaged in the formation of the LLP.
- The Registrar, once satisfied with the above compliances; grants the Certificate of Incorporation i.e., Form 16 within 14 days of filing Form 2.
- Form 3 (Information concerning LLP agreement and changes, if any made therein) and Form-4 (Notice of Appointment of Partner or Designate Partner, his consent etc.) can be filed with a prescribed fee simultaneously with Form 2 or within 30 days of incorporation or 30 days of the subsequent changes.
Profito Global helps you choose the right name and relieve you from checking as to if it’s been taken, obtaining the TAN and PAN registration for the LLP, etc. Profito Global professionals assist you in each of the steps listed above. By choosing us for your LLP registrations we provide the needed guidance for a tension-free registration process. We will do all necessary groundwork for filing and keeping tabs on the relevant dates and documents concerning the registration of your LLP.
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What are the features of a Limited Liability Partnership?
- A Body Corporate: It is having a separate legal entity from its partners.
- Perpetual Succession: An LLP has existed for an indefinite period. It doesn’t dissolve due to one or all of its partners.
- Capacity to sue and to be sued: As it is a separate legal entity, it can sue others if any wrongdoings and be sued by anyone.
- Mutual Agency: One of the prominent differences, when compared to a partnership, is that liability that is caused by illicit actions of one partner need not be borne by the rest of the partners of the LLP.
- Limited Liability: The partners of an LLP have limited liability i.e.; their obligations are limited to the agreed share of contribution to the Limited Liability Partnership as per Section 26 of the Act.
- Business for Profit only: A Limited Liability Partnership can be constituted only for businesses with the purpose to make profits, it cannot have aims such as charitable or non-profits.
- Minimum and Maximum number of partners: Every LLP should have a minimum of two partners and at least two individuals as designated partners. And one of the designated partners should be a resident in India. There is no limit to the maximum number of partners in an LLP.
What is the fee for LLP registration?
The fee for LLP registration as decided by the MCA is based on the capital invested in an LLP. The limits are:
- If an LLP’s contribution does not exceed one lakh, the fee to be paid is Rs.500.
- If an LLP’s contribution is between one lakh and five lakhs, the fee is Rs 2000.
- If an LLP’s contribution exceeds five lakhs but is lesser than 10 lakhs, then the fee to be paid is Rs. 4000.
- If an LLP’s contribution exceeds 10 Lakhs, then the fee to be paid is Rs.5000.
Can a listed company be converted to an LLP?
No, only a private or an unlisted company can be converted to an LLP.
What is the period through which the LLP name can be registered?
The name can be reserved for a time of three months with the Registrar. However, foreign LLPs and companies have the opportunity to reserve their existing names for three years after the initial intimation to the Registrar.
What are the disadvantages of an LLP?
- High penalty for non-compliance
- No scope for equity investments
- Higher tax rates for LLP.
- Financial details have to be disclosed publicly.