A Limited Liability Partnership (LLP) can prove to be a much better business vehicle than a regular partnership. Partnerships are affected by personal liabilities, and LLPs remove excessive regulations of the Indian Partnership Act, 1932. Furthermore, there are tax benefits, no audit requirements below a certain capital, no cap with regard to a number of partners or capital contribution requirements.
Benefits of a Limited Liability Partnership
Separate Legal Entity:
- An LLP is a separate legal entity from its partners. Each partner can sue the other in case a situation arises.
- It has an uninterrupted existence that follows perpetual succession, i.e, the partners might leave, but the business will remain. A term of dissolution has to be mutually agreed upon by the firm, to dissolve.
Transferring the ownership of LLP is simple. A person can be quickly inducted in as a designated partner, and the ownership will switch to them.
Suitable For Small Business:
- LLPs with a capital of less than 25 lakhs and turnover less than 40 lakhs per year, do not require any formal audits. It makes registering as LLP beneficial for small businesses and startups.
- An LLP can own or acquire property because it is recognized as a juristic person. Partners of an LLP cannot claim the property as theirs.
No Owner /Manager Distinction:
An LLP has partners, who own and manage the business. This is different from a private limited company, whose directors may be different from shareholders. For this reason, venture capitalists do not invest in the LLP structure.
Checklist qualities of an LLP in India
Separate Legal Entity:
- Starting a business requires specific requirements to be eligible for registering as an LLP.
- The normal partnership structure of an LLP shares the same attributes when it comes to internal management, profit distribution, and tax liabilities. But, it offers the partners less financial liability (limited liability).
- Any business who has, at least two partners are required to form an LLP. There is no limit to the maximum number of partners.
- The nomination of a natural person, if a body corporate is a Partner.
- No shared capital requirement, though each partner must have an agreed contribution towards it.
- Minimum capital contribution: There is no minimum capital requirement for an LLP (or a company, for that matter). The LLP should have an authorized capital of at least Rs. 1 lakh.
- At least one designated partner has to be an Indian resident
- DPIN for all Partners
- DSC (Digital signature certificate) for all the Designated Partners
- Address proof for the office of LLP. The registered office of an LLP does not have to be a commercial space. Even a rented home can be the registered office, so long as an NoC is obtained from the landlord.
- With regard to the changes in FDI regulations dated November 10, 2015, foreign investors are now permitted to have 100% FDI automatically. The 100% FDI in LLP is granted to foreign companies who operate in activities or sectors where 100% FDI is considered permissible through the channels of the automatic route. Also, there should not be any performance pre-requisites that are linked to FDI. A definite interpretation of the terms such as ‘ internal accruals’ and ‘ownership and control’ has been provided with reference to the LLP. Thus, Foreign investment is made smoother and quicker with FDI in LLP.
- The LLPs will also be permitted to opt for downstream investment in a different company or even choose LLP in those sectors which allow 100% FDI in accordance with the automatic route. This does not come up with any performance constraints that are FDI linked.
Quick and easy steps to register LLP in India – A detailed process
At Startupgenie, we make the process of LLP registration seamless and hassle-free.
- Arrange basic documents of Partners
- Fill in an online form with accurate information
- Apply for Digital Signature and DIN of Partners
- Prepare all legal documents
- Apply to name availability of the proposed LLP
- Verification of all documents and forms by the respective Government dept and authorities
- File Incorporation Docs with ROC
- Get LLP Incorporation Certificate
- Drafting of LLP Agreement
- Filing of LLP Agreement
Step 1: Obtaining DSC And DIN
The first step is to obtain DSC of the desired partners of Limited Liability Partnership. The reason for this is that all the forms need to be submitted online and require the directors’ digital signatures. The law also requires that all directors file for a DIN number. The application has to be made in Form DIR- 3.
Step 2: Application For Name Approval
This process involves registering the LLP. Before doing this, you would need to see if the name is already taken. You can check on the free search facility on the MCA portal. The registrar only approves LLP names that are not taken before.
The approval of the name will be made by the Registrar only if the Central Government does not deem it undesirable. The name should also not hold any resemblance to any of the existing partnership firms, LLPs, trademarks, or body corporates.
Step 3: LLP Agreement
LLP agreement is very crucial in a limited liability partnership as it determines the mutual rights and duties amongst the partners, and between the LLP and the partners. The partners enter into the LLP agreement upon the LLP registration by filing form 3 online on the MCA portal. This procedure has to be done within 30 days of the date of incorporation.
Step 4: LLP Incorporation Certificate
Once the registrar approves your MOA and AOA, you’re steps closer to getting your LLP registered. The next step is to get the LLP Incorporation Certificate. You can do it by submitting all the documents to the registrar. The time frame is between 2- 12 days. Once you get your LLP Incorporation Certificate, you’re ready to go.
Step 5: Apply For PAN & TAN & Bank Account
As soon as you get the incorporation certificate, you need to apply for your company PAN & TAN with the NSDL. The cost for this procedure is less than Rs.200 and it takes around three weeks to get done.
Documents Required for LLP registration in India
The method of LLP registration in India does not require much legwork when it comes to documents.
To Be Submitted By Partners
- Scanned copy of PAN Card or passport (Foreign Nationals & NRIs)
- Scanned copy of Aadhar Card/ Voter’s ID/Passport/Driver’s License
- Scanned copy of latest bank statement/telephone/mobile bill or electricity/gas bill
- Scanned passport-sized photograph Specimen signature (blank document with signature [partners only])
- Note: Any one of the partners must self-attest the first three documents. In the case of foreign nationals and NRIs, all the documents must be notarized (if currently in India or a non-Commonwealth country) or apostilled (if in a Commonwealth country).
For Registered Office
- Scanned copy of the latest bank statement/telephone/mobile bill, or electricity or gas Bill
- Scanned copy of the notarised rental agreement in English
- Scanned copy of No-objection certificate from the property owner
- Scanned copy of sale deed/property deed in English (in case of owned property)
How Startupgenie Helps With The LLP Registration Process?
With Startupgenieh, registering an LLP is one of the easiest processes in India. We make the entire compliance procedure simple and provide our best efforts to complete the process as early as possible. When you choose us to be your partner to register LLP, you get to avail of a few undeniable benefits. The Ministry of Corporate Affairs comes up with updates to the LLP process and Startupgenie takes care of them for you.
- DSC for one director and DIN for up to three directors
- Drafting of MoA & AoA
- Registration fees and stamp duty
- Company Incorporation Certificate
We also provide assistance with:
- Free consultation, followed by subsequent meetings to clear every concern you may face.
- Complete support on opening a current bank account
- Comprehensive and on-time updates on ROC compliances.
- Online accounting software valid for one year.
- A master file that contains all the documents needed to file the incorporation.
- A dedicated service manager is present at all times.
- Being a separate legal entity from the existing partnership firm, LLP will have its own pan card, and a new/separate GST Registration on the name of LLP.
- You will also get zero balance current account!
FAQs on Convert a Partnership to an LLP
What documents are needed to convert a partnership into an LLP?
- Address proof of the office
- Regulatory authority’s approval
- Details of all the partners and directors
- Consent of all the partners and directors
- Latest income tax return filing
- NOC from tax authorities
- Creditors and their consent
- Certified liabilities and assets of the partnership
What are the major steps which need to be taken to convert a partnership firm into an LLP?
- All the partners must obtain a DSC
- Next, they must obtain a designated partner identification number
- Once this is done, the company must look to get their name approved
- The name must include LLP at its end
- File LLP forms 17, 2, and 3
What is the Eligibility required to convert a partnership firm into an LLP?
- At least seven partners.
- Share capital worth at least INR 1 lakh
- Capital must be divided into either units or shares
- Object Clause from the partnership firm’s Memorandum of Association
- DSC and DIN of all the partners
- Memorandum of Association of the partnership
- Articles of Association
- Copy of the application for name approval
- NOC from the property owner