Limited Liability Partnership denotes LLP. As a partnership firm, a partnership is a corporate business vehicle that provides its members with the benefits of a company’s limited liability and allows them to manage their internal management on mutually agreed-upon terms.
Partners have limited liability for any debt incurred while running the business in the future. This LLP is known as a ‘hybrid between a company and a partnership‘ because it combines elements of both a ‘corporate structure’ and a ‘partnership firm structure’.
According to the terms of the LLP Agreement, the partners should contribute to the LLP. Their share could be in the form of tangible or intangible property, movable or immovable property, money, or cash.
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LLP Registration in India
LLP Registration in India has evolved into an alternative form of business that combines the comforts of the corporation and the partnership firm into a single entity. The Limited Liability Partnership Act of 2008 established rules related to LLP in India. An LLP is a one-of-a-kind hybrid and is ideal for establishing small and medium-sized businesses.
Managing and incorporating an LLP in India is simple. A minimum of two partners must be registered in an LLP. However, there is no upper limit of the number of partners. The LLP agreement specifies the rights and responsibilities of the partners. Under the LLP structure, a single partner would not be held responsible for the misconduct or negligence by other partners. The partners are responsible for all compliances and provisions outlined in the LLP agreement.
Process of LLP Registration
The LLP registration procedure is as follows:
- Obtain a Certificate of Digital Signature (DSC)
- Request a Director Identification Number (DIN)
- Acceptance of a Name
- The formation of an LLP
- Fill out the LLP Agreement
- To register an LLP, the designated partners must first apply for a digital signature because all documents are filed online and must be signed digitally.
- The next step is to obtain the DINs of all the LLP’s directors.
- After logging into the MCA official website, two proposed LLP names can be filed for name approval, which is handled by the Central Registration Certificate.
- The following documents must be annexed to the incorporation of LLP:
- Subscriber sheet
- PAN card and Adhaar card of the partners and designated partner
- Proof of registered office and rent agreement or sale deed can be attached.
- Electricity/telephone Bill
- NOC of the owner of the premises is rental
- Details of LLP
How to Obtain a Digital Signature Certificate
Each individual wishing to be appointed as a partner of an LLP must first apply for a DSC before proceeding with the registration process. DSC is required because all documents for the LLP must be filed online and digitally signed. All forms filed electronically on the MCA portal must be digitally signed by a DSC.
Only government-approved certifying agencies can issue the DSC. The cost of obtaining DSC differs depending on certifying authorities.
Section 24 of the Indian Information Technology Act, 2000, requires certifying authorities to grant a licence to issue a digital signature certificate. Examples include the National Informatics Centre, IDRBT, CDAC, NSDL, and other CAs.
Benefits of LLP Registration in India
People prefer LLP registration in India over forming a private limited company.
LLPs are more flexible and easy to set up. Entrepreneurs find it feasible to start their business because day-to-day operations are simple. Let us look at certain benefits provided by LLPs.
Low registration costs
The cost of incorporating an LLP in India is lower than that of including a public limited company or a private limited company. You can register an LLP through IndiaFilings for as little as Rs 7899.
No requirement for a minimum contribution
There is no requirement for a minimum contribution because an LLP can be formed with the least amount of capital possible.
Absence of the upper limit on the number of business owners
An LLP requires a minimum of two partners, but there is no upper limit on the number of partners. By contrast, a private company cannot have more than 200 members.
Mandatory audit is not necessary
Regardless of whether the company is public or private, its accounts must be audited. This requirement is not a compulsion in LLPs and provides a relevant compliance advantage. A limited liability company is only required to perform audits under two circumstances.
When the aggregate contribution of LLPs exceeds Rs. 25 lakhs.
When an LLP’s annual turnover exceeds Rs. 40 lakhs.
Taxation aspect of LLP
The LLP is subject to income taxation, but the partner’s share is not. Therefore, no dividend distribution tax (DDT) is due.
LLP over a partnership
The objective of introducing LLP in India is to introduce a type of business that provides owners with limited liability and is easy to manage and hassle-free. LLP is a different type of firm than a partnership. Here, we look at the key distinctions between an LLP and a partnership firm.
Liability is limited
Partners in an LLP are not externally liable to creditors. Therefore, the partners are personally liable to the extent of their contribution to the LLP. In a partnership firm, the partners are personally liable to the creditors. Therefore, entrepreneurs may refuse to be partners in the partnership firm. Partners in an LLP have limited liability protection.
Number of partners
LLPs and partnership firms must have at least two partners, and an LLP, instead, has no upper limit on the number of partners. If the number of partners in a partnership firm falls below two for any reason, the firm is dissolved. In the case of LLPs, if the number of partners is less than two, the sole partner can find a new partner without dissolving the LLP.
Shifting of the LLP and a partnership firm
An LLP can shift their registered office and operate a bank account across India. An LLP is registered with the Ministry of Corporate Affairs of India.
The state government controls the Registrar of Firms, who registers partnership firms. Therefore, operating or moving across India with partnership firms is complex.
A LLP is a type of business organisation that protects individual partners from the joint liability of the other partners in the firm. They are only liable for their share because their liability is limited; they do not consider the personal assets of members. Similar to shareholders in a corporation with limited liability, partners in an LLP have a limited liability.
Furthermore, an LLP differs from a corporation in that partners in an LLP directly manage the business. By contrast, shareholders in a corporation elect a board of directors to perform essential tasks. LLPs are treated the same as any other partnership firm in taxation.
What exactly is DPIN?
A designated partner identification number (DPIN) is a one-of-a-kind identifier assigned to all existing and proposed designated partners of an LLP. Every current or proposed director must have DPIN.
What is the minimum requirement of partners to form an LLP?
An LLP must have at least two Partners, whereas an LLP can have an unlimited number of partners.
How to become a partner in an LLP?
The designated partner must be a natural person over the age of 18. The LLP Act of 2018 allows a foreign national, including a foreign company, to establish an LLP in India if at least one designated partner is Indian.
What is the lower limit of fund requirement to start an LLP?
An LLP can be established with any amount of money; there is no such thing as a minimum investment. A partner can provide both tangible and intangible assets.