Limited Liability Partnership is such form of business where 2 or more people come together to form Partnership for doing a business. Limited Liability Partnership is also popularly known as LLP and it also enjoy the benefit of separate legal identity which is not available in normal partnership. In this form of business, the liability of Partners is Limited, in other words Partners are liable to pay to the extent of the money they have contributed to start the LLP. Each Partner in LLP is responsible for their own act and cannot be made liable for the misconduct or negligence of other Partner.
Limited Liability Partnership thereby has the features of both Partnership Firm as well as a Company thereby making it one of the attractive entity option for many businesses.
A Limited Liability Partnership has 2 types of Partners – Designated Partners and Partners.
Convenient to Form
It is easy to start and manage a business like entrepreneurs. LLP agreements are customized in according to meet the needs of partners concerned. There is fewer formalities in areas of legal compilation, annual meeting and resolution as compared to any other Private Limited Company.
No Minimum Capital Requirement
LLP can be started with the minimum amount of capital money. Capital may be in the form of tangible, movable asset like Land, machinery or intangible form.
No Requirement of Audit
LLP is required to audit their account in the following situation: When the contributions of the LLP exceeds Rs. 25 Lakhs, or When annual turnover of the LLP exceeds Rs. 40 Lakhs
LLP have to face less compliance burden as they have to submit only two statements i.e. the Annual Return & Statement of Accounts and Solvency. Whereas in the case of private company, at Least 8 to 10 regulatory formalities and compliances are required to be duly completed
High Income Tax Rate
The income tax rate for a company with a turnover of up to Rs.250 crores is 25%. However, LLPs are taxed at a 30% rate irrespective of the turnover.
Transfer of Ownership
Transferring the ownership right to someone else is a challenging and a tedious task. The Partners wishing to transfer/her rights will need written consent from all the partners. In case if some Partner raises an objection, the transfer process cannot proceed further.
The first step would be to acquire the DSC for the Designated Partners of the company.
The availability for the name of the LLP must be checked, by making an application for the same in RUN-LLP.
The forms FiLLiP along with DIN application are to be duly filled and submitted while making an online application.
An application must be made for PAN (Permanent Account Number) and TAN (Tax Deduction Account Number) mandatorily to get the LLP registered.
The registrar verifies the documents and if it is satisfactory, the certificate of incorporation (COI) is awarded along with the PAN and TAN.
Draft LLP Agreement and submit LLP agreement in Form 3 within 30 days of incorporation of LLP.
For Designated Partners
PAN Mandatory- Indian National / Passport – Foreign National
Proof of Identity – Voter Id/Passport/Driving License – Any 1
Proof of Address (Electricity Bill/Bank Statement/Telephone Bill/Mobile Bill not older than 2 months) – Any 1
*All documents for Indian National – To be self-attested
*All documents of Foreign National – To be self-attested & apostilled
For Registered Office
Proof of Ownership – Sale Deed / Rent Agreement duly signed copy
Copy of Utility Bill – Electricity Bill / Telephone Bill / Gas Bill – Any 1
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There is no minimum capital requirement in LLP. An LLP can be formed with the least possible capital.
1. Utility Bill of Registered Office;
2. Proof of Owneship of Registered Office;
3. Copy of PAN & Aadhar as Identity proof of Partners;
4. Copy of Utility Bill/Bank Statement as Address proof of Partners.
Filing of LLP Form 8 (Statement of Accounts & Solvency) and LLP Form 11 (Annual Return) is mandaory for all the LLPs.
If a limited liability partnership (LLP) has just two members and both are designated partners, both can become authorised signatories.
Ministry of Corporate Affairs (MCA) is the registering authority in India.
Time taken for registration is considered on the basis of working hours of government officials which is 12 working hours on a single day. Therefore, the approx. time taken for formation of entity would be 4 days.