The Limited Liability Partnership (LLP) structure is a fairly new alternative of business structure. It provides the benefits of limited liability of a company while still allowing the flexibility of organizing management on the basis of a mutually arrived agreement. With merits such as lower cost of formation and compliance, lesser restrictions, and, not to forget, the flexibility, more entrepreneurs are finding this suitable for their start-ups and going for LLP registration.
This business structure is a cross between corporate structure and traditional partnership. Taking the plus points from both, and still, reducing the liabilities, there are many Differences between Limited Liability Partnership (LLP) and Partnership or Company Structure. These are proving useful to the new start-ups, as well as people opting for converting to this model, from their previous one.
With easy to set up (as compared to a Company), still, the individual members have lower liabilities, not extending to their personal assets (when compared with a partnership), to any debts that arise from running the business.
Internationally, LLP is already proven to be the favoured mode for start-ups. For all these reasons, new start-ups are opting to go for on-line LLP Registration in India.
Requirements of LLP Registration
Before we focus on the process and elements involved in the LLP registration, as per the guidelines of the LLP Act, 2008, make sure you have at least two persons, either individual or body corporate, as Partners. There’s no upper limit to the number of partners here.
Following points are essential for LLP Registration, according to the LLP Act:
- Office: Your registered office must be in India, for communication.
- Designated Partners: At least two individuals must be there as Designated partners. They will be responsible for operating the business, once LLP registration is completed. They would be the Authorized signatories to all work-related documents. Also, at least one of the Designated Partners must be a resident in India.
- Get a Director Identification Number (DIN): All designated partners must hold a Director Identification Number (DIN) from MCA, (Ministry of Corporate Affairs). Basic information and details, such as ID proof and Residence Proof) about the partner would be filed online to acquire this. To register your LLP, you would need to file an application through E-form SPICe (for new ones ) or eForm DIR-3 (for an existing one) online. Just make sure to keep in mind the Key changes in DIN Application procedure.
- DSC Registration: The Designated Partners or Directors, now, must go through the DSC registration process. These are used to ensure the security and authenticity of the documents filed electronically. As per MCA, all filings for LLP registration online are required to be filed using the DSC.
- Name: You need a name, for your LLP registration process. It must be a distinct name that no other LLP or Partnership firm or Company is already registered with.
- Incorporate your LLP online: File the form FiLLip online, with the details about the Proposed LLP, e.g. Reserved name, details about partners and the consent.
- LLP Agreement: There must be an agreement between the partners or between the LLP and its partners. Information from this, need to be filled in Form 3, on the MCA portal. This enquires about the Liability part of the LLP Agreement. Else, the provisions in the First Schedule of the LLP Act, 2008 will be applied. These provisions govern the Rights, Duties, Indemnity, and Remuneration etc.
- Fees: Applicable fees are to be paid while filing online.
- Once the Registrar of Companies (ROC) is satisfied with the forms filed, you will be issued a Certificate of Incorporation, and an LLPIN (LLP Identification Number) will be assigned.
- With this LLPIN, you have the LLP License to start your business.
Requirements for Foreign Limited Liability Partnership (FLLP) Registration
It is possible for foreign nationals and NRIs, to become a partner in an Indian LLP. The process for the same is a bit more elaborate.
- Submission of Passport is a pre-requisite. These must have notarization by the relevant authority of their respective country.
- Their Residence Proof is compulsory too, as applicable.
- In this case, no DIN is required. The various forms, documents and the working of the LLP will have to be digitally signed by the authorized signatory. In other words, obtaining DSC is mandatory.
Points to note when drawing LLP Agreement
Make sure you don’t miss out on any of the below significant points when drawing your agreement:
- Name & Address of the LLP
- Name & Addresses of the partners (Including Designated Partners)
- Rights and Duties of all the partners
- Proposed Business Activity for LLP
- Any other business to be carried on by LLP
- The Initial Contributions of the partners, Monetary as well as Non-Monetary
- Agreed conditions for Admission of a new partner or Cessation of an old partner
- Norms agreed in case of change of name
- The ratio in which to share profit or loss and any remuneration
- Liability Ratio, of partners and LLP
- Maintenance of Accounts,
- Mode of Operations
- Indemnity Clause, how would the risks and losses be appropriated between the partners
- Goodwill Clause, and partner’s share in it
- Procedure to appoint Arbitrator and Auditor, for settlement of accounts & dispute
- Procedures relating to Amendments to or Winding up of LLP
Procedure for Online LLP Registration
As mentioned above, all the documents for LLP are filed online and they have to have Class 2 digital signature of the designated partners of the proposed LLP.
A web service, RUN LLP can be accessed after login to MCA. In this, you fill 2 proposed names for your LLP. RUN LLP is being processed by the Central Registration Centre (CRC). It allows only 1 re-submission if the initial 2 names have been rejected or objected to.
It is an integrated form offering multiple services e.g. Reserving Name, allotting DIN, and Incorporating LLPs. It is to be attached to the above-stated documents, such as PAN card, Address Proof etc.
This must be filed within 30 days of the incorporation, printed on Stamp Paper.
Just remember, a maximum of 2 resubmissions is allowed if any defect found in Form FiLLiP. The forms have to be re-submitted within 15 days of intimation of the defect.
An, an Addendum to FiLLiP will be filed if the number of partners/designated partners is exceeding the maximum number allowed in the eForm. Or if the details of all the partners/designated partners cannot be provided due to the size of the attachments.
The Advantages of Limited Liability Partnership are too huge for the service industry or for the activities involving professionals like Company Secretaries, Chartered Accountants, Cost Accountants, Advocates, and other professionals. In fact, many businesses have taken the initiative to Convert Partnership to LLP, as earlier a Partnership model meant they didn’t have a separate entity, legally. Its also an ideal platform for small and medium enterprises, who are just starting their ventures, as this structure needs less compliance to be met with.
LLP is expected to be a suitable vehicle for small enterprises and for investment by venture capitalists, with its lower investment needs. It is comparatively hassle-free, in daily operations, with significantly lower compliance requirements and costs to deal with. There’s more flexibility in operations and arrangements, as compared with a Limited Company.
With plenty of reasons that are making people opting for this structure, if you too are planning to start your business, make your decision and give us a call at +91-8750008585, or drop a mail at [email protected]. For more information, you can go through our website at LegalRaasta.