We all have heard about different types of company formation. Still, many people get confused regarding different types of company formation. Therefore, to clear all the confusion, let us discuss the Limited Liability Partnership(LLP) in detail. In this article, we will understand everything important that you need to know about the Limited Liability Partnership(LLP).
What Does a Limited Liability Partnership Mean? (LLP)
A Limited Liability Partnership (LLP) is a corporate business vehicle that provides its members with the benefits of limited liability while also allowing them to manage their internal management based on mutual agreement, similar to a partnership firm.
Furthermore, In terms of liability under a Limited Liability Partnership, the company is responsible for losses or debts incurred in the course of business, but individual members of the LLP are not.
Characteristics of LLP(Limited Liability Partnership)
- According to Section 3 of the Limited Liability Partnership Act, 2008, an LLP is a body corporation and a legal entity independent from its partners with endless succession.
- According to Section 6(1) of the Limited Liability Partnership Act, 2008, an LLP must have at least two partners. However, there is no limit to the maximum number of partners you can have.
- LLPs must keep annual accounts, with audits required only if the amount exceeds Rs. 25 lakh or the annual revenue exceeds Rs. 40 lakh.
- An LLP will continue to exist even though its partners change. In addition, An LLP must have two designated partners, one of whom must be a resident of India.
How to get LLP Registration?
Following are the steps to get LLP Registration.
- Get a Designated Partner Identification Number(DIN), which will serve as an Identity card.
- Fill out Form 7 and pay the necessary fees.
- Obtain a DSC, or Digital Signature Certificate, as it will be required in the later steps. If you don’t already have one, apply for it.
- After getting a DSC, fill out Form 1 and pay Rs 200 to register a name for your LLP Registration.
- Next, incorporate the LLP via Form 2. Get ready the LLP Agreement by now.
- Using Form 3, File the LLP Agreement as per Section 2(o) of the LLP Act, 2008.
What exactly is FiLLiP?
The government made changes to the LLP registration process in September 2018. The government made these changes to make it easier for LLPs to form.
Forms 1 and 2 were replaced by Reserve Unique Name-Limited Liability Partnership or RUN-LLP.
Besides, the Form for incorporation of Limited Liability Partnership was replaced by Form FiLLiP, respectively.
Applicants should submit these forms to a Registrar appointed by the Central Registration Centre, who will verify them.
In addition, If the LLP only has two partners, applicants can use FiLLiP to obtain DPINs.
Designated Partner Eligibility Criteria
- Individuals are the only ones that can be designated as partners. Other corporations, associations, businesses, and organizations cannot join a limited liability company as partners.
- A unique identification number is required for anyone who wishes to become a partner.
- Any LLP needs at least 2 partners.
- In a limited liability partnership, there can be any maximum number of members.
- At least one of the designated partners must be a resident Indian citizen, and Another important requirement is consent letter from the other Designated Partners.
- At last, The person must be at least 18 years old.
Documents Required for LLP Registration in India
- ID Proof of Partners(PAN Card)
- Address Proof of Partners(Driver’s license or Aadhar Card)
- Residence Proof of Partners (Bank statement, telephone bill, mobile bill, electricity bill, or gas bill)
- Passport Size Photographs of all the partners.
- Passport (in case of Foreign Nationals/ NRIs)
- Proof of Registered Office Address
- Digital Signature Certificate or DSC of atleast one director.
Requirements for LLP statutory compliance
The management of an LLP is simple. For instance, unless your turnover exceeds Rs. 40 lakh or your paid-up capital exceeds Rs. 25 lakh.
In addition, without shareholders, the partners own the company themselves. However, LLPs must adhere to some other compliances. For instance, Every fiscal year, LLPs must file their Statement of Accounts with Solvency on or around October 30th.
What are the benefits of forming a limited liability partnership (LLP)?
LLPs have multiple advantages. Some of the most significant are as follows.
- LLPs are easy to form, with fees ranging from Rs 500 to Rs 5600. The process is quite intuitive and easy to follow, and is not lengthy or time-consuming.
- Partners enjoy less risk as they do not have full liability. Their personal assets will not be dissolved if the company comes under debt, making this a safer option.
- LLPs also have a number of tax advantages. They are also exempt from mandatory audits unless their annual revenue exceeds Rs 40 lakhs.
The following are some of the tax advantages that an LLP provides.
- The income of the partners is not taxable.
- Section 40B of the Internal Revenue Code exempts cash dividend taxes.
- Partner remunerations, such as bonuses, commissions, and interest, are tax-deductible.
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