Formation of Limited Liability Partnership

Limited Liability Partnership (LLP) is a hybrid between a company and a partnership. It is an alternative corporate business form which offers the benefits of a limited liability to the partners at low compliance costs. It also allows the partners to organize their internal structure like a traditional partnership.

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Advantages of LLP Incorporation

Limited Liability

Like a company, in an LLP all its partners enjoy limited liability, i.e., they are liable only up to their respective capital contributions. Their personal estates will also not be used for recovery of debts and losses beyond their respective liabilities.

Perpetual Succession

LLP can continue to exist even after the retirement, insanity, insolvency or death of one or more partners. Further, it can enter into contracts and hold property in its name.

Separate Legal Entity

LLP is completely liable for its assets. Further, the liability of the partners is limited to their capital contributions. Hence, the creditors of the LLP are not the creditors of individual partners.

Flexible role for Partners

LLP has extremely flexible management roles for the partners. The roles are defined in the LLP agreement that is drafted after mutual agreement. Under the structure, each partner has the right to manage the LLP and have the right to choose how much management they want. Thus, they can have a very active role and even act as silent partner.

Fewer Compliance Requirements

LLP is much easier and cheaper to run than a private limited company as the compliance requirements are much less that the private limited company.

Easy to wind-up

The process to close an LLP takes much less time than that of a private limited company.

Lower Registration Costs

The cost of registration of LLP is low as compared to other form of businesses.

No requirement of Compulsory Audit

LLPs are not required to audit the accounts. Any other company is mandated to get its accounts audited. LLP is required to audit their accounts only when either the contributions of LLP exceed INR 25 lakhs or annual turnover of the LLP exceeds INR 40 lakhs

No DDT

If the partners of LLP withdraw profits, an additional tax liability in the form of Dividend Distribution Tax (DDT) is not payable by partners. Hence, profits of LLP can be easily withdrawn by partners.

Process of LLP Incorporation

GST Registration is an online process. Following steps need to be followed for the purpose of GST Registration:

1. Obtain Digital Signature Certificate for partners

2. Reservation of Name

3. Incorporation of LLP

4. Filing of LLP Agreement

5. Applying for PAN & TAN

1. Obtain Digital Signature Certificate for partners

Since the documents of LLP are filed online and are required to be digitally signed, the proposed designated partners need to obtain their digital signature certificates from certifying agencies.
They usually have a validity of one or two years and can be used at that time for filing of Income Tax documents or Ministry of Corporate Affairs (MCA) documents online.

2. Reservation of Name

Application for reservation of name is required to be made to the MCA. Form LLP-RUN (Limited Liability Partnership-Reserve Unique Name) is required to be filed for reserving the name of proposed LLP which shall be processed by MCA.
Two proposed names of the LLP can be provided in one application. Availability of a particular name can also be checked over MCA as name resembling the name of some previous organization is not approved.
DPIN and DSC are not required for Name Reservation through RUN-LLP.
The name is valid for a period of 3 months.

3. Incorporation of LLP

After the LLP Name Approval Letter is issued to the proposed Partners signifying approval of name by the LLP, partners have 3 Months to file the incorporation documents and register the LLP.
Application for online registration of LLP is required to be made online using FiLLiP (Form for incorporation of Limited Liability Partnership).

4. Filing of LLP Agreement

LLP Agreement shows the mutual rights and duties among the partners and between LLP and its partners.
It has to be filed in Form 3 online within 30 days of incorporation. LLP Agreement has to be printed on Stamp Paper, value of which is separate for every state.

5. Applying for PAN & TAN

The last step is to apply for the PAN & TAN of LLP after which the bank account can be opened for LLP.

Documents required for LLP Incorporation

ID Card

ID Card (PAN Card) of the Partners

Address Proof

Address Proof of the Partners

Photograph

Photograph of Partners

Passport

Passport (in case of foreign nationals)

Utility Bill

Utility Bill of the proposed Registered Office of the LLP

No-Objection Certificate

No-Objection Certificate from the Landlord

Copy of Rent Agreement

Copy of Rent Agreement between the LLP and Landlord

Who and Why should you get LLP registered?

Any person who would like to avail the advantages of limited liability, fewer compliances, ease of operations, lower costs, no DDT may opt for this form of structure.

How StartUp Movers can help you?

HOW STARTUP MOVERS CAN HELP YOU?

Our team of professionals can assist you with entire process for company incorporation. We will help you from procuring Digital Signature Certificate to obtaining incorporation certificate.

We will deliver you following:

Name Approval Letter.
Incorporation Certificate.
LLP Agreement.
DIN Approval Letter and Digital Signature Token
PAN Card of the LLP and Company Stamp
TAN/TDS Letter of the LLP.
Incorporation kit.

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Frequently asked questions

An existing company can be converted into LLP?

Yes, any existing company can be converted into LLP by complying with the provisions of Clause 58 and Schedule III and IV of the LLP Act. Form 18 needs to be filed with the Registrar along with FiLLiP for the purpose of conversion.

Whether name of LLP can end with ‘Private Limited’?

Name of LLP shall end with either ‘Limited Liability Partnership’ or ‘LLP’. Word ‘limited’ shall be allowed in name only within ‘Limited Liability Partnership’.

What is the process of intimating changes in Partner’s details?

The change in partner’s details can be intimated by filing e-form 4 within thirty days of such change without additional fee and with additional fee thereafter.

What are the documents required to be filed by LLP annually?

LLP is required to file LLP Form 8 (Statement of Account & Solvency) and LLP Form 11 (Annual Return) annually. The ‘Annual Return’ is required to be filed within 60 days of close of the financial year and ‘Statement of Accounts & Solvency’ shall be filed within 30 days from the end of six months of the financial year to which it relates. Every LLP has to maintain uniform financial year ending on 31st March of a year.

What is the validity of the approved name of the LLP?

The approved name of the LLP shall be valid for a period of 3 months from the date of approval. If the proposed LLP is not incorporated within this period, the name shall lapse and shall be available for any other LLP. There is no provision for renewal of name.

What will be the obligation of a partner in case he changes his name or address?

Every partner shall inform the LLP of any change in his name or address within a period of fifteen days of such change. The LLP, in turn, would be under obligation to file such details with the Registrar within thirty days of such change in Form 4.

Is it mandatory to file and get registered the partnership agreement under LLP?

Yes. It is mandatory to execute and file the LLP Agreement as per Section 2(o), 2(q), 22 and 23 of the LLP Act. As per provisions of the LLP Act, in the absence of agreement as to any matter, the mutual rights and liabilities shall be as provided for under Schedule I to the Act. Therefore, in case any LLP proposes to exclude provisions/requirements of Schedule I to the Act, it would have to enter into an LLP Agreement, specifically excluding applicability of any or all paragraphs of Schedule I.