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Limited Liability Partnership LLP Act

Why choosing an LLP is the right choice, and how to start it in India?

May 11, 2023 by Team Instabizfilings

Blog Details

Starting a new company is not easy because it should meet certain requirements. Those who want to incorporate a new organization should know the types first that help make the right decision. Limited liability partnership, shortly known as LLP, is becoming a popular form of organization structure in various countries due to several reasons. It is the best choice for start-ups to ensure smooth operations. On the other hand, launching an LLP requires proper guidelines that help accomplish goals to a large extent. 

 

6 Reasons to select an LLP structure 

 

1. Limits legal liability 

 

The primary advantage of starting an LLP is a limited liability because partners take risks only for their contributions. They don’t face any problems caused by another’s mistakes and are liable for their individual errors. 

 

2. Minimal legal compliance 

 

An LLP requires only minimal legal compliance and doesn’t require any auditing report that saves time. Another advantage of forming an LLP is that it provides ways to submit only 2 financial statements in a year. Apart from this, it can organize board meetings every quarter to know everything in detail. 

 

3. Attracts potential investors

 

Forming an LLP offers the best opportunities to attract potential clients that help generate more revenues. Besides, it makes feasible methods to expand the operations in local and international markets, thereby helping to move to the next level. 

 

4. Transfers and exits become easy 

 

A partner of an LLP can resign and exit anytime from a company with a simple supplement agreement. Also, he can assign his profits to another person while exiting a firm. At the same time, a partner should follow the instructions properly when it comes to transfer and exit. 

 

5. Retain profits 

 

Since individual partners are responsible for their own profits, they can claim tax benefits that help save money. 

 

6. Flexibility

 

Starting an LLP allows partners to agree together to determine how to run a company with high success rates. Moreover, it makes feasible ways to divide profits between profits based on income. Each partner will get the rights to manage the business entity in an LLP by shaping their skills. To avoid confusion, they can even develop an agreement to know their role in the operations. 

 

7. Easy to dissolve 

 

An LLP is easy to dissolve after the formation process, which helps save time. However, anyone who wants to start the same should seek ideas from different sources to handle complex issues. 

 

What are the steps followed in the LLP registration process?

 

Starting an LLP involves some steps, and one should follow them that help plan operations without any hassles. Entrepreneurs should know how to register an LLP online because it gives ways to save time. Online registration is easy, and they can submit the document and other things quickly. 

Here are some things to consider while registering an LLP online.

 

1. Getting a digital signature certificate 

 

A digital signature certificate, shortly known as DSC, is important for LLP registration online, and every partner has to get the same when it comes to a company formation. It is wise for the designed partners to obtain a certificate from an authorized certifying agency. On the other hand, the costs may vary from one certifying agency to another agency in a location. 

 

2. Submitting an application form on the MCA website 

 

Entrepreneurs who want to form an LLP should visit the Ministry of Corporate Affairs (MCA) website to submit the Fillip (Form for incorporation of Limited Liability Partnership) with scanned copies of the required documents. The application should have the signature of a director, CEO, managing director, or CFO. A director identification number (DIN) will be issued to an individual who is an existing director or intends to become a director of a company. 

 

3. Name approval 

 

An LLP requires a unique name that is different from other companies. Hence, it should check for the names that are not in use in the market, and the best way to know them is the MCA website. It provides ways to select a suitable name for a company. Apart from this, there is a clause that allows an organization to pick two names accordingly. However, partners should consider submitting the same with the prescribed fees to a registrar. They can even submit another form within 15 days to fix errors. 

 

4. Knowing the documents

 

Documents play an important role in online LLP registration to launch a company as soon as possible. Entrepreneurs should submit documents for partners and LLP that give ways to gain more advantages. Some of them include ID proof, address proof, residency proof, office address, DIN certificate, and utility bills which are not older than 2 months. Partners should check all documents and organize them properly while submitting an application. 

 

5. Understanding the fees 

 

LLP partners have to pay some fees during the registration process, and they should know more about them in detail. This will help process an application form online that gives ways to get the jobs done with ease. 

 

6. Incorporation of an LLP

 

An LLP should file an electronic form with the necessary documents after getting the name approval. It can even make changes if a selected partner doesn’t have a DIN number. An LLP incorporation certificate will be issued to a company after the e-form approval that helps plan operations accordingly. The Ministry of corporate affairs (MCA) in India will review an application form with more care and approve the same after verifying the details. 

 

7. Submission of LLP agreement 

 

The LLP agreement is necessary for a company, and it should submit the same in e-form 3 after incorporating a company. It outlines the reciprocal rights and obligations between the partners and the LLP, thereby showing ways to proceed further. 

 

At the same time, the stamp paper amount may vary from one state to another state in India. LLP formation requires an understanding of laws, and entrepreneurs can partner with an agency to handle all matters with ease. Forming an LLP will become a simple process while partnering with a leading agency.  


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