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Limited Liability Partnership

An overview

LLP combines the benefits of a partnership with that of a limited liability company. LLP is best suitable for small business especially for those entrepreneurs who are in service sector and cost conscious.

  • It has a separate legal entity just like companies
  • The liability of each partner is limited to the contribution made by partner
  • The cost of forming an LLP is low
  • Less compliance and regulations
  • No requirement of minimum capital contribution
  • The minimum number of partners to incorporate an LLP is 2. There is no upper limit on the maximum number of partners of LLP. Among the partners, there should be minimum two designated partners who shall be individuals, and at least one of them should be resident in India.
  • The minimum number of partners to incorporate an LLP is 2. There is no upper limit on the maximum number of partners of LLP. Among the partners, there should be minimum two designated partners who shall be individuals, and at least one of them should be resident in India.

Two important benefit of choosing an LLP

  • As per LLP act audit is not compulsory for those LLP with paid up capital less than 25 lacs and turnover are below 40 lacs per annum.
  • Similar to private limited company moreover number of partners are not restricted to 50 and all partners continue to be liable only for their portion of liability which is not the case in traditional partnership firm.

Big drawback of an LLP

No owner and management distinction, both ownership and management are taken care by partner and for this very reason venture capitalist / private equity firm would be less interested to invest in your business.

Step 1 : Obtain DSC

Before initiating the process of registration, you must apply for the digital signature of the designated partners of the proposed LLP. This is because all the documents for LLP are filed online and are required to be digitally signed.

So, the designated partner must obtain their digital signature certificates from government recognized certifying agencies.

Step 2 : Apply for DIN

You have to apply for the DIN of all the designated partners or those intending to be designated partner of the proposed LLP.

The application for allotment of DIN has to be made in Form DIR-3. You have to attach the scanned copy of documents (usually Aadhaar and PAN) to the form. The form shall be signed by a Company Secretary in full- time employment of the company or by the Managing Director/Director/CEO/CFO of the existing company in which the applicant shall be appointed as a director.

Step 3 : Reservation of Name

LLP-RUN(Limited Liability Partnership-Reserve Unique Name) is filed for the reservation of name of proposed LLP which shall be processed by the Central Registration Centre under Non-STP. But before quoting the name in the form, it is recommended that you use the free name search facility on MCA portal. The system will provide the list of closely resembling names of existing companies/LLPs based on the search criteria filled up.

This will help you in choosing names not similar to already existing names. The registrar will approve the name only if the name is not undesirable in the opinion of the Central Government and does not resemble any existing partnership firm or an LLP or a body corporate or a trademark. The form RUN-LLP has to be accompanied with fees as per Annexure ‘A’ which may be either approved/rejected by the registrar. A re-submission of the form shall be allowed to be made within 15 days for rectifying the defects. There is a provision to provide for 2 proposed names of the LLP.

Step 4 : Incorporation of LLP

  • The form used for incorporation is FiLLiP(Form for incorporation of Limited Liability Partnership) which shall be filed with the Registrar who has a jurisdiction over the state in which the registered office of the LLP is situated. The form will be an integrated form.
  • Fees as per Annexure ‘A’ shall be paid.
  • This form also provides for applying for allotment of DPIN, if an individual who is to be appointed as a designated partner does not have a DPIN or DIN.
  • The application for allotment shall be allowed to be made by two individuals only.
  • The application for reservation may be made through FiLLiP too.
  • If the name that is applied for is approved, then this approved and reserved name shall be filled as the proposed name of the LLP

Step 5 : File LLP agreement

LLP agreement governs the mutual rights and duties amongst the partners and also between the LLP and its partners.

  • LLP agreement must be filed in form 3 online on MCA Portal.
  • Form 3 for LLP agreement has to be filed within 30 days of the date of incorporation.

The LLP Agreement has to be printed on Stamp Paper. The value of Stamp Paper is different for every state.

Document required to register as LLP

Documents of Partners Document of LLP
PAN Card/ ID Proof of the Partners
Proof of Registered Office Address
Address Proof of the partners
Digital Signature Certificate
Residence Proof of Partners
Photograph
 
Passport (in case of Foreign Nationals/ NRIs)

Cost involved in Registration process

Step Cost
Step 1 – DSC
Around Rs. 1500-2000 for 2 partners(varies depending on the agency)
Step 2 – DIN
Rs. 1000 for 2 partners
Step 3 – Name Reservation
Rs. 200
Step 4 – Incorporation
Depends on capital contribution. Contribution up to Rs. 1 lakhs – Rs. 500, Contribution between Rs. 1 and 5 lakhs – Rs. 2000
Step 5 – LLP Agreement
Depends on capital contribution. Contribution up to Rs 1 lakhs – Rs 50 for filing Form 3 and stamp duty based on the state where LLP is formed
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