Understanding Limited Liability Partnerships
Understanding Limited Liability Partnerships Get Started At Rs. 6999/- (Excl. of Govt Fees)
Advantages of an LLP
- Limited Liability: A key advantage is the limited liability protection. Unlike general partnerships, partners in an LLP are not exposed to unlimited personal liability. Their financial responsibility is typically limited to their investment in the LLP.
- Flexible Management: LLPs offer flexible management structures. The partners themselves define their roles and responsibilities within a written LLP agreement. This allows for both active and passive (silent) partner involvement.
- Perpetual Succession: An LLP, like a corporation, enjoys perpetual succession. This means the business continues to exist even if partners change or leave, ensuring stability and continuity.
- Ease of Formation: LLP formation is generally a straightforward process governed by state laws. It typically involves filing a registration form with the relevant authorities.
Minimum Requirements for LLP Formation
- Minimum of two partners.
- Minimum of two designated partners, with at least one residing in India.
Required Documents for LLP Registration
The following documents are typically required for LLP registration in India:
Application for LLP Registration
A completed and signed application form.
Partnership Deed
A written agreement outlining partner rights, responsibilities, and profit-sharing ratios. This must be printed on non-judicial stamp paper and signed by all partners.
Designated Partner Identification Number (DPIN)/Director Identification Number (DIN)
All designated partners require a unique identification number (DIN). Previously, this was a DPIN, but now a DIN is required.
Address Proof
Proof of the LLP’s registered office address (e.g., rental agreement, utility bill). The registered office must be in India. For rented property, a rent agreement and NOC from the landlord are required. For self-owned property, an electricity bill or other address proof is sufficient. Documents must be valid and not more than two months old.
Identity Proof
Identity proof (e.g., passport, driver’s license, Aadhar card) for all designated partners.
Address Proof of Partners
Address proof (e.g., utility bill, passport, voter ID) for all designated partners.
Consent and Affidavits
Consent to act as a designated partner (Form 9) and an affidavit declaring compliance with registration requirements (Form 4).
Subscription Sheet
A document signed by all partners expressing their intention to become partners.
Statement of Assets and Liabilities
A statement of the LLP’s assets and liabilities as of the date of the LLP agreement.
Payment of Fees
Payment of the prescribed registration fee.
LLP Registration Process
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- Director Identification Number (DIN): Apply for DINs for all designated partners using Form DIR-3.
- Name Reservation: File Form 1 to reserve the desired LLP name. It's recommended to check name availability on the MCA portal beforehand. Provide six name preferences. The registrar approves the name if it's not undesirable and doesn't resemble existing entities or trademarks.
- Incorporation of LLP: File Form 2 for LLP incorporation, ensuring accurate details regarding partners, contributions, etc. Pay the required registration fee. The form must be digitally signed by a designated partner with a DIN and a practicing professional (advocate, company secretary, chartered accountant, or cost accountant).
- LLP Agreement Filing: File the LLP agreement (Form 3) online on the MCA portal within 30 days of incorporation. The agreement must be printed on stamp paper.
Frequently Asked Questions
Q. Change in Partner
Any change in partners or designated partners (admission, resignation, cessation, death, expulsion) must be reported using e-Form 4 within 30 days, along with the required fees. A supplementary LLP agreement (Form 3) must also be filed within 30 days to reflect changes in partner rights and duties. Form 4 must include a statement from the incoming partner consenting to the partnership.
Q. Accounts, Audit, and Annual Return
LLPs are required to maintain and file accounts. The necessity of an audit depends on specific criteria. LLPs must also file an annual return. Consult with a professional for specific requirements.
Q. Number of Partners
A minimum of two persons are required to register an LLP.
Q. Partner Requirements
Requirements for becoming an LLP partner are defined in the LLP agreement.
Q. Tax Policies
Consult with a tax professional for detailed information on LLP tax policies.
Q. FDI in LLP
FDI is allowed in LLPs in certain sectors. Consult with a legal professional for specific regulations and eligible investors.
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