With 42,524 LLPs registered between April 2024 and December 2024, the demand for LLP registrations is at an all-time high. Further, a 2022 research showed a total of 252460 LLPs in India.
Showing a rapid growth in the number of companies registered each year, LLP is the preferred business design for many.
Understanding Limited Liability Partnerships
Introduced in 2008 under the Limited Liability Partnership Act, LLPs offer a highly flexible business design to entrepreneurs. Falling under the purview of the Ministry of Corporate Affairs (MCA), all you need for an LLP are two Directors who are going to act as partners and some documentation.
Since LLPs protect the personal assets of the partners during legal proceedings and install the company as a separate legal entity, this is a preferred business design even for some of the largest corporations.
Why opt for an LLP Registration?
By establishing your business as a Limited Liability Partnership with an LLP Registration, you get the following benefits:
- Separates the company from the partners and establishes it as a legal entity.
- Protects the personal assets of all the partners.
- Easy to transfer ownership by introducing people as partners.
- Ensure the perpetual existence of the company in the event of the death or retirement of a partner.
Who is eligible for LLP Registration?
The following are eligible to establish their company as an LLP:
- Permanent residents and Indian citizens.
- Foreign nationals as well as companies who can provide necessary paperwork.
- Non-resident Indians (NRIs) can join as partners in LLPs.
- Other companies (including LLPs) can join as a partner.
Further, to be eligible to form an LLP, you need to keep the below in mind:
- People who are designated as partners should be legally adults (above 18 years) and at least one of them should be Indian.
- The number of partners that an LLP can have are between 2 and 200.
- Partners should be able to provide all the necessary documents required for LLP registration.
- Partners should be well-equipped to handle daily activities as well as statutory requirements such as annual compliance for LLPs.
Getting Registered as a Limited Liability Partnership (LLP)
If you are interested in getting an LLP registration for your company, you need to know the following to complete the process successfully.
Usual Documents Requested for LLP Registration
Depending on who is applying for an LLP Registration, these will vary as follows:
● Indian Nationals
These include:
- PAN Card of all the partners.
- ID Proof (Aadhaar Card)
- Proof of address for the business
- Proof of residence for partners
● Foreigners
These include:
- A valid passport
- Proof of residence
- Proof of address
● Registered Offices
Documents requested include:
- Proof of address for the registered office.
- An NOC signed by the owners of the premises.
- A Subscriber Sheet that is witnessed by a CA or a Lawyer.
Further, some general requirements that apply to all include:
- An LLP agreement that provides clarity of distributions of rights and roles.
- DPIN (Designated Partner Identification Number) as a unique identifier for each partner.
- DSC (Digital Signature Certificate) that is issued by the Ministry of Corporate Affairs.
- Documents to state the type of Incorporation.
- Annual Return: for LLPs, you need to File Form 11 in the MCA portal.
Stepwise Process for LLP Registration
Approached sequentially, the steps to be followed are:
1. Getting a DSC
A Digital Signature Certificate gives the shareholders the authority to digitally sign the online forms.
2. Picking a Name for Your Business
Make sure the name you select for your business is in line with the standards set by the Ministry of Corporate Affairs. This implies:
- The name should be unique.
- It should reflect the company’s activities and brand image.
- It should not contain any prohibited, offensive, or misleading words.
- The name shall end with LLP.
- Use of “National” or “India” can only be done with permission from the Central Government.
- Use of “Bank”, “Insurance”, “University”, etc. needs permission from the regulatory authority.
3. Get a TAN and PAN
Having a Tax Deduction and Collection Account Number (TAN) and a Permanent Account Number (PAN) is essential for every business.
4. Prepare the LLP Agreement and file it
Draft an LLP Agreement that outlines the terms, business design, and duties of each partner. This needs to be filed online under Form 3 provided in the MCA portal. This needs to be completed within 30 days of getting the certificate of incorporation.
5. Attach all relevant documents
Upload all documents, as mentioned above, when filing the application for LLP registration.
6. Submit the form for LLP registration
Once done, submit the form to the Registrar of Companies. On approval, you will receive a Certificate of Incorporation.
Compliance Requirements to be Met for LLPs
Once the registration and other formalities are completed for your LLP, the business needs to maintain compliance with the norms set by regulatory authorities. The most significant of these is the Annual Compliance for LLP, to be filed within 60 days after the financial year ends.
The Annual Compliance for LLPs involves filing the below:
- Annual returns with the MCA
- Yearly income tax returns
- GST returns
- Statement of Accounts and Solvency within 30 days after the first half of the financial year.
- Tax audit returns for turnover exceeding 40 lakhs.
- DIR-3 KYC form for active directors
Further, LLPs also need to maintain events-based compliance for activities such as:
- Picking new partners and/ or removing existing ones.
- Changing the name of the company.
- Updating the LLP agreement
If LLPs are unable to maintain compliance, they are liable to be fined for the misstep. Further, this can tarnish their business image and market reputation.
To Conclude
With easier compliance norms, LLP registration is the preferred route for many new businesses. If you are planning to set up a business, opting for the LLP registration route allows you and your partner(s) ample flexibility in terms of responsibilities and business design.
Enjoy a flexible liability design and succession continuity with LLP registration.