Ashish Garg & Associates Limited Liability Partnership

Limited Liability Partnership

Limited Liability Partnership (LLP) Registration in India

What is an LLP?

A Limited Liability Partnership (LLP) is a hybrid business structure that combines the operational flexibility of a partnership with the limited liability protection of a company. It is governed by the Limited Liability Partnership Act, 2008 and is ideal for professionals and businesses seeking minimal compliance with limited liability.

LLP Registration Prerequisites and Eligibility Conditions

  1. Partners:
    • Minimum 2 partners required (one must be a resident of India).
    • No upper limit on the number of partners.
    • Individuals or corporate entities can be partners.
  2. Designated Partners:
    • At least 2 designated partners, both of whom must have a Designated Partner Identification Number (DPIN).
    • At least one designated partner should be an Indian resident.
  3. Digital Signature Certificate (DSC):
    • All designated partners must have a valid DSC to file electronic forms.
  4. Unique Name:
    • The LLP’s name must not conflict with an existing LLP, company, or trademark.

Characteristics of Limited Liability Partnership (LLP)

CharacteristicDescription
Separate Legal EntityLLP is distinct from its partners.
Limited LiabilityPartners’ liability is limited to their capital contribution.
Perpetual SuccessionLLP continues to exist even if partners change.
No Minimum Capital RequirementNo minimum capital is required to form an LLP.
Flexible StructureCombines the benefits of partnership and company structures.
GovernanceGoverned by the LLP Agreement and the LLP Act, 2008.

Advantages of LLP

  1. Limited Liability Protection:
    Partners are not personally liable for the firm’s debts or obligations.
  2. Separate Legal Entity:
    LLP can own assets, enter into contracts, and sue or be sued in its own name.
  3. Operational Flexibility:
    LLP agreements allow partners to define roles, rights, and duties flexibly.
  4. No Mandatory Audit Requirement:
    LLPs with turnover less than ₹40 lakh or capital less than ₹25 lakh are exempt from mandatory audits.
  5. Ease of Fundraising:
    LLPs can raise capital through corporate partners or financial institutions.

Disadvantages of LLP

  1. Limited External Funding Options:
    LLPs cannot raise equity funding as companies do.
  2. High Penalty for Non-Compliance:
    Late filing or non-compliance attracts heavy penalties.
  3. Limited Recognition:
    LLPs may not be preferred for large-scale or high-growth ventures.
  4. Rigid Exit Process:
    Dissolution of an LLP requires compliance with formalities and legal procedures.

Limited Liability Partnership (LLP) Name Structure

  • Format:
    [Proposed Name] + LLP
    Example: “Innovative Solutions LLP”
  • Guidelines:
    • The name should reflect the nature of the business.
    • It must be unique and comply with naming guidelines issued by the MCA (Ministry of Corporate Affairs).
    • Avoid names that are identical or similar to existing trademarks or entities.

Documents Required for LLP Registration

  1. For Partners:
    • PAN card (mandatory for Indian partners).
    • Passport (mandatory for foreign partners).
    • Address proof (Aadhar, voter ID, driving license, etc.).
    • Latest bank statement/utility bill.
  2. For LLP Office:
    • Proof of registered office address (rent agreement, NOC from owner, utility bill).
  3. Other Requirements:
    • Digital Signature Certificate (DSC) for all designated partners.
    • LLP Agreement details (drafted post-registration).

Effortless LLP Registration: A Step-by-Step Process

  1. Obtain DSC and DPIN:
    All designated partners need a DSC and a DPIN.
  2. Name Reservation:
    File Form RUN-LLP to reserve a unique name.
  3. Filing Incorporation Form:
    Submit Form FiLLiP (Form for Incorporation of LLP) with details of partners, registered office, and contribution.
  4. Drafting the LLP Agreement:
    Prepare the LLP Agreement, outlining governance rules, profit-sharing ratios, and partner responsibilities.
  5. Register the LLP Agreement:
    File the LLP Agreement in Form 3 with the Registrar of LLPs.
  6. Certificate of Incorporation:
    Upon successful verification, the MCA issues the Certificate of Incorporation.
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