Limited Liability Partnership
Limited liability partnerships (LLPs) are a flexible legal and tax entity that allows partners to benefit from economies of scale by working together while also reducing their liability for the actions of other partners.
The Concept of LLP in India was introduced back in 2008 by the Limited Liability Partnership Act of 2008. This unique hybrid is suitable for setting small, medium-sized businesses. Minimum two partners are required to incorporate an LLP. However, there is no upper limit on the maximum number of partners of an LLP.
Features of Limited Liability Partnership
- It has a separate legal entity just like companies.
- There must be a minimum of two designated partners.
- Atleast one designated partner must be a resident of India.
- The liability of each partner is limited to the contribution made by the partner.
- The cost of forming an LLP is low.
- Less compliance and regulations.
- No requirement of minimum capital contribution.
Required Documents for Limited Liability Partnership Company
- Documents of Partners
- PAN Card/ ID Proof of Partners – All the partners are required to provide their PAN at the time of registering LLP. PAN card acts as a primary ID proof.
- Address Proof of Partners – Partner can submit any one document out of Voter’s ID, Passport, Driver’s license or Aadhaar Card. Name and other details as per address proof and PAN card should be exactly the same. If the spelling of own name or father’s name or date of birth is different in address proof and PAN card, it should be corrected before submitting to ROC.
- Residence Proof of Partners – Latest bank statement, telephone bill, mobile bill, electricity bill or gas bill should be submitted as residence proof. Such bill or statement shouldn’t be more than 2-3 months old and must contain the name of partner as mentioned in PAN card.
- Photograph – Partners should also provide their passport size photograph, preferably on white background.
- Passport (in case of Foreign Nationals/ NRIs) – For becoming a partner in Indian LLP, foreign nationals and NRIs have to submit their passport compulsorily. Passport has to be notarized or apostil led by the relevant authorities in the country of such foreign nationals and NRI, else Indian Embassy situated in that country can also sign the documents
Foreign nationals or NRIs have to submit proof of address also which will be a driving license, bank statement, residence card or any government-issued identity proof containing the address.
If the documents are in other than the English language, a notarized or apostil led translation copy will be also be attached.
- Documents of LLP
- Proof of Registered Office Address: Proof of registered office has to be submitted during registration or within 30 days of its incorporation.
- If the registered office is taken on rent, a rent agreement and a no-objection certificate from the landlord has to be submitted. No objection certificate will be the consent of the landlord to allow the LLP to use the place as a ‘registered office’.
- Besides, any one document out of utility bills like gas, electricity, or telephone bill must be submitted. The bill should contain the complete address of the premise and owner’s name and the document shouldn’t be older than 2 months. Digital Signature Certificate: One of the designated partners needs to opt for a digital signature certificate also since all documents and applications will be digitally signed by the authorized signatory
Advantages to Incorporate an LLP
- Separate legal entity- An LLP has a separate legal entity, just like companies. The LLP is distinct from its partners. An LLP can sue and be sued in its own name. The contracts are signed in the name of the LLP.
- Lower Cost and Less Compliance: Compared to the incorporation of other business entities, the incorporation of LLP involves low cost. There is no need to maintain any statutory records except books of accounts. Less government intervention and less compliance level are enforced on an LLP as compared to the restrictions enforced on other business entities.
- Limited Liability: Personal assets of the partners are secured, as LLPs have the feature of limited liability. As compared to traditional partnerships, the liability of each partner is limited to their share as mentioned in the agreement.
- No requirement of compulsory audit: An audit is not mandatory for LLPs, as it is for other registered companies. If an LLP has a turnover less than Rs. 40 lakhs and capital contribution less than Rs. 25 lakhs, then only it is required to audit its account.
- Tax benefits: LLPs are not required to file taxes; only partners individually have to file their taxes. This means no dividend distribution tax and no minimum alternate tax have to be paid by LLPs.
- Partners are not liable for other partners: The partners are not accountable for any error or negligence or any misconduct act of any other partner. This is a key difference from that of an unlimited partnership.
Time Involved for LLP Registration
LLP formation starting from obtaining DSC to Filing Form 3 takes approximately 10 days, subject to departmental approval and reverts from the respective department.