Introduction to LLP (Limited Liability Partnership)

An LLP (Limited Liability Partnership)  is a legal form of business structure that has some features of both the Partnership firm and the Private Limited company. The benefit of the partnership is afforded regarding ownership and operating authority; it has the limited liability feature of a company. Currently, the legal regulation of LLPs is done under the Limited Liability Partnership Act, 2008 in India.

Why Choose LLP for Your Business?

• Limited Liability Protection: Members of an LLP are not generally responsible for the losses of the LLP meaning more security as compared to the normal partnership.

• Ease of Operation: It is easier to manage LLP since it does not have to comply with various legal requirements like a private limited company.

• Tax Transparency: While a company has their own taxation system, an LLP does not have a separate taxation structure and is rather taxed according to the income generated by the partner.

Digital Signature Certificate (DSC)

A Digital Signature Certificate (DSC) is an electronic version of a physical signature, used to authenticate the identity of the individual submitting documents online. In the case of LLP incorporation, DSC is required for filing forms and signing documents electronically.

Why is DSC Required for LLP Incorporation?

• Authentication: DSC acts as a guarantor for the validity and validity of the documents which are uploaded into the Ministry of Corporate Affairs (MCA) portal.

• Legality: For any document submitted to the MCA portal (such as forms, applications), a valid DSC is necessary to make the submission legally binding.

• Security: DSC protects against fraud and tampering of the documents submitted online.

Prerequisites for LLP Incorporation

• The ones identified are as follows The designated partners shall include the following The organization is to acquire an additional Digital Signature Certificate (DSC).

• All of the designated partners include the Director Identification Number (DIN).

• Choose the name for your LLP that should be unique and should follow the rules and regulations prepared by the MCA.

• You should also have a physical address of your registered office. And this is also the type of address being a home or business address.

• Documents for Partners:

1. Identity Proof: Copy of the PAN India, passport, Aadhar Card, or the voter ID of the partners.
2. Address Proof: Bank statement, utility bill, or any government-issued document showing the residential address of the partners.

Steps for Online LLP Incorporation with DSC

• Step 1: Apply for Digital Signature Certificate (DSC)

1. Choose a Certifying Authority: To get your DSC, you need to choose a licensed Certifying Authority (CA) such as eMudhra, Sify, or National Informatics Centre (NIC).

2. Documents Required: There are few prerequisite requirements that you will need for obtaining the DSC:

• Proof of identity (e.g., Aadhar, Passport, etc.).

• Proof of address (e.g., utility bills, bank statements, etc.).

3. Submission: The DSC application can be submitted online. Once processed, the CA will issue your DSC.

• Step 2: Apply for Director Identification Number (DIN)

For any individual who wants to be a designated partner in an LLP, DIN is mandatory. This is an important step to ensure that the person is authorized to act as a partner.

1. Form DIR-3: To seek this number, one has to complete Form DIR-3.

2. Required Documents: Photo identification / identification card/ Passport, proof of residents, including passport sized photograph of the individual.

3. After the DIN is obtained from the Ministry of Corporate Affairs (MCA), the applicant may go ahead and register him or herself as a designated partner in the LLP.

• Step 3: Name Reservation for the LLP

Before you can register your LLP, you need to choose a unique name that complies with the naming rules specified by the MCA.

1. Form RUN-LLP: Incorporate the RUN-LLP (Register Unique Name for LLP) form with the Ministry of Corporate Affairs to know whether the chosen name is available or not.

1. Two name options can be given in the form.

2. The name must not be similar to any existing company or LLP name and must not violate trademarks.

3. After the approval of the name, you will receive a Name Approval Letter from the MCA.

• Step 4: Drafting the LLP Agreement

The description of an LLP is an agreement of the operations of the LLP, the rights of the partners of the LLP and the responsibilities that they possess. It includes:

1. Capital contribution of each partner.

2. Profit-sharing ratio.

3. Role and responsibilities of each partner.

4. Management and operational details.

This document is mandatory for LLP registration and both the partners intend to sign it. It can also be submitted online together with other registration papers.

• Step 5: Fill in the LLP Incorporation Form (FiLLiP)

After obtaining the name approval and drafting the LLP Agreement, you need to fill out Form FiLLiP (Form for Incorporation of LLP) on the MCA Portal.

1. Details to Provide:

• Proposed name of the LLP.

• Partners' details (Name, Address, DIN, etc.).

• Registered office address.

• Capital contribution and profit-sharing ratio.

2. Form Submission: Online submission of the form is done through the MCA online portal. The DSC of the designated partners will be mandatorily signed electronically on this form.

• Step 6: Filing the LLP Agreement with the MCA

After the incorporation of LLP, it is mandatory to file the LLP Agreement within a period of 30 days from the date when it has been formed. This is done using Form 3.

1. Form 3: This form contains details of the LLP Agreement, and it must be filed after the incorporation of the LLP.

2. The DSC of the designated partners is also needed to sign this form in the electronic format.

• Step 7: MCA Verification and Approval

According to the instructions stated and forms and documents submitted, the MCA will then validate the application. If everything is in order, the Certificate of Incorporation will be issued.

1. The Certificate of Incorporation will include:

1. LLP Name.

2. LLP Identification Number (LLPIN).

3. Date of Incorporation.

• Step 8: Post-Incorporation Compliances

As much as the formation of LLP is concerned, there are some basic actions that one has to manage once the LLP is incorporated:

1. Obtain PAN and TAN: In case the LLP has not applied for a PAN and TAN during the course of incorporation, apply for one.

2. Register GST: However, you need to compulsorily register for GST if your turnover has exceeded the prescribed limit.

3. Open a Bank Account: Other requirements are opening of an account in the LLP's name.

4. Maintain Books of Accounts: Ensure that you are keeping and preparing proper books of accounts to support and sustain it as per the laws of LLP.

5. Annual Filing: In case one did not do so, they must register the annual return and the financial statements at the MCA.

Benefits of Registering an LLP Online

• Cost-effective: General partnership has a relatively low cost of registration and it has less legal requirements than a private limited company.

• Limited Liability Protection: Limited liability is enjoyed by partners with a view of protecting their individual properties.

• Flexibility in Management: LLPs are conveniently flexible in this aspect and do not impose a large number of restrictions on the internal functioning of the company.

• Simple Incorporation Process: It is easy for a company to register through the MCA Portal and this can be done by using digital signatures.

Common Challenges During Online LLP Registration

• Name Availability Issues: The MCA may refuse to register the proposed LLP name if the name resembles the name of another company or trademark.

• Incorrect Document Submission: Make sure you enter the identity proof, address proof documents or any other proof document properly.

• DSC Expiry or Issues: Before proceeding to submission, please check that your DSC is a current one, and it is linked to the MCA Portal account.

Conclusion

Registering a Limited Liability Partnership (LLP) online via the MCA portal is a straightforward process, especially when utilizing a Digital Signature Certificate (DSC). This method offers start-ups a flexible and cost-effective alternative to other business structures. By adhering to the prescribed guidelines and submitting all required documents, LLP formation in India can be achieved with ease. Furthermore, DSC enhances the security and legal validity of form submissions and signings.

Disclaimer

The information provided in this blog is purely for general informational purposes only. While every effort has been made to ensure the accuracy, reliability and completeness of the content presented, we make no representations or warranties of any kind, express or implied, for the same. 

We expressly disclaim any and all liability for any loss, damage or injury arising from or in connection with the use of or reliance on this information. This includes, but is not limited to, any direct, indirect, incidental, consequential or punitive damage.

Further, we reserve the right to make changes to the content at any time without prior notice. For specific advice tailored to your situation, we request you to get in touch with us.