LLP Incorporation Procedure 2024: Easy Guide

Introduction to Limited Liability Partnership (LLP)

The Limited Liability Partnership (LLP) is a mix of a partnership and a company. It’s popular worldwide, including the UK, US, Singapore, and Australia. In India, the LLP registration process follows the Limited Liability Partnership Act, 2008.

Definition and Concept of LLP

An LLP is its own legal entity, separate from its partners. It can make deals, own things, and be sued in its name. This makes customers and suppliers feel secure, knowing they’re dealing with a real business.

“The LLP format allows professional/technical expertise and initiative to combine with financial risk-taking capacity efficiently.”

In an LLP, partners’ personal assets are safe from the firm’s debts. This is different from a traditional partnership, where everyone is responsible for the firm’s actions.

Key Features of LLP

The LLP has many good points for businesses:

• It’s its own legal entity
• Partners’ liability is limited
• It has a flexible management setup
• It keeps going even if a partner leaves
• It’s cheaper and easier to follow rules than a company
• You don’t need a lot of money to start

An LLP’s rules come from a contract between partners. This gives them more freedom than companies do. They can decide how to share profits and who does what.

LLPs are great for professional services like law and accounting. They let partners work together while keeping their personal assets safe. By choosing the LLP registration process, businesses get the best of both worlds. It’s a smart choice for many in India.

Advantages of Incorporating an LLP

Starting a Limited Liability Partnership (LLP) has many benefits. It’s great for entrepreneurs and professionals. You get the best of both worlds with one registration.

This is perfect for businesses with two or more partners. It avoids the hassle of a full company setup.

Limited Liability Protection

LLPs protect partners’ personal assets. They don’t have to worry about the business’s debts. This is different from a partnership, where partners are personally responsible.

Each partner’s liability is only their investment. This gives partners peace of mind and protection.

Flexible Management Structure

LLPs let partners control the business easily. They decide the rules and how things work in the LLP agreement. This agreement can change as the business grows.

Starting an LLP is cheap for small businesses. It doesn’t cost anything to start. This is good for those who want to save money but still have a formal business.

LLPs also save money on stamp duty and audits. This makes running a business cheaper.

Perpetual Succession

LLPs keep going even if partners change. This is different from partnerships, which can end when a partner leaves. It means the business can keep growing without stopping.

Registering an LLP boosts your business’s image. It makes your business seem more reliable and trustworthy. This helps build a strong brand.

LLPs in India have fewer rules than companies but more than partnerships. They are a good choice for businesses.

In short, LLPs offer many benefits. These include protection, flexibility, no start-up costs, and lasting success. They are a great option for businesses looking for a balance.

Pre-requisites for LLP Incorporation

Before starting the Limited Liability Partnership (LLP) process in India, it’s key to know the basics. These steps help make the registration smooth and right. Let’s look at what you need for LLP incorporation.

Minimum Number of Partners

To start an LLP, you need at least two partners. There’s no limit on how many partners you can have. Partners can be people, companies, or other LLPs. But, one partner must live in India.

Also, remember, the total number of partners, including those who help with the LLP, can’t be more than 3.

Designated Partners

Every LLP must have at least two designated partners who are people. These partners make sure the LLP follows the law. They are the main faces of the LLP.

The age of partners, including designated ones, must be between 18 and 65. Designated partners need a Designated Partner Identification Number (DPIN).

Designated partners must share certain info:

• Name
• Residence status
• Contribution form and amount
• Interest disclosure

They also need a Digital Signature Certificate (DSC). To get a DSC, they need:

• Self-attested PAN
• Self-attested Aadhar
• Mobile Number linked to Aadhar
• E-Mail ID

The LLP incorporation process involves three key stages: Pre-Requisites, Documentation and Registration, and LLP Agreement.

Other important things for LLP registration include:

1. A unique name for the LLP
2. A registered office address
3. Enough money from partners
4. Know Your Customer (KYC) documents of partners
5. Latest utility bills for the office address
6. A no objection certificate from the property owner

By knowing these basics, you can start the LLP process with confidence. Make sure you have all the documents ready. This way, you can avoid delays and make your LLP journey smoother.

Obtaining Digital Signature Certificate (DSC)

Before you start the LLP registration, you need a Digital Signature Certificate (DSC) for the partners. This is key because all documents are filed online and need digital signatures. The partners must get their DSCs from eight government-recognized Certification Agencies.

The Ministry of Corporate Affairs requires a Class-II or above DSC for e-Filings. DSCs last one or two years and can be renewed. The cost of a DSC includes a USB token, issuance, and renewal fees.

When you apply for a DSC, you might or might not need to provide documents. For Aadhar eKYC, no extra documents are needed. But, if you use a certified bank letter, you’ll need to provide documents.

Getting a Class 3 DSC is advised for better security and acceptance. A DSC proves the documents’ authenticity during LLP registration. Remember, partners must apply through government-recognized Agencies, like those listed by the Ministry of Corporate Affairs (MCA).

Digital Signature Certificates are essential for all designated partners in the LLP registration process, as they ensure the authenticity and security of the documents filed online.

To wrap up, getting a valid Digital Signature Certificate (DSC) is key for LLP registration. Make sure to apply for the right DSC category from a recognized Agency and have your documents ready, if needed.

Applying for Designated Partner Identification Number (DPIN)

When you start a Limited Liability Partnership (LLP) in India, getting a Designated Partner Identification Number (DPIN) is key. This number is special for each designated partner. It helps them do their jobs well.

Eligibility and Requirements

To get a DPIN, you must be a real person, not a company or group. You should be between 18 and 65 years old. Also, you need a valid Digital Signature Certificate (DSC). Plus, one partner must live in India.

Submitting Form DIR-3

To apply for a DPIN, you need to fill out Form DIR-3. You’ll also need to attach scanned copies of your Aadhaar and PAN. A Company Secretary, Chartered Accountant, or Cost Accountant must sign it.

After you submit the form, you’ll get a message saying it’s been registered.

If your partners change, you must update your DIR-3 form. You’ll need to include all the documents and a signature from a professional.

Minimum two designated partners are needed for the proposed LLP, with one being a resident of India. All designated partners are required to obtain a DPIN or Director Identification Number (DIN) from the provided website.

Getting a DPIN is a big step in starting your LLP. It makes sure your partners are recognized by the Ministry of Corporate Affairs (MCA). This lets you move forward with your business and follow the laws of 2024.

Limited Liability Partnership – LLP Incorporation Procedure 2024

Starting a Limited Liability Partnership (LLP) in India is easy and can be done online. Just follow these steps to set up your LLP and start doing business. This guide is up to date for 2024.

Step 1: Name Reservation

The first thing to do is to reserve a unique name. You do this by filing the RUN-LLP form. This form is checked by the Central Registration Centre. Before you submit, check if the name is free using the MCA portal’s name search.

You can suggest up to two names. If there are mistakes, you have 15 days to fix them. After your name is okayed, you must apply to form your LLP within 3 months.

Step 2: Filing Incorporation Documents

After naming your LLP, you need to file the FiLLiP form. This form goes to the Registrar in the state where your office will be. You’ll need to give details like the partners’ info, office address, and certificate of incorporation.

LLPs need at least two partners, with no limit on more. At least two must be Designated Partners (DPs) for daily work. You must have at least two DPs, with one being from India.

Step 3: Obtaining Certificate of Incorporation

After your application is approved, the Registrar will give you the Certificate of Incorporation (CoI). This CoI will have your LLP’s ID and the DPs’ IDs. The date on the CoI is when your LLP officially starts.

As per the LLP Act, executing and filing an LLP Agreement is mandatory within 30 days of incorporation.

If your LLP has too many partners, you’ll need to update the details. You can change partner info by filing eForm 4 within thirty days. Remember, partners must tell the LLP about name or address changes within fifteen days. The LLP must then file these changes with the Registrar within thirty days.

By following these steps and keeping up with the latest rules, you can set up your Limited Liability Partnership in India. Make sure to file important documents like the LLP agreement. Also, get the needed IDs to keep your LLP legal and meet ongoing rules.

Documents Required for LLP Registration

To register a Limited Liability Partnership (LLP) in India, you need certain documents. These are for the partners, the LLP itself, and the office address. Having these documents ready makes the registration process smooth and quick.

Partner Documentation

Each partner must give specific documents to prove who they are and where they live:

• PAN Card: All partners need to give their Permanent Account Number (PAN) card.
• Residence Proof: Proof of where they live is needed. This can be voter’s ID, passport, driver’s license, or utility bills not older than 2 months.
• Passport-sized Photograph: A recent photo is required for each partner.

Foreign Nationals and NRIs

Foreign nationals or Non-Resident Indians (NRIs) need extra documents:

• Passport: They must give their passport, which should be notarized or apostilled.
• Proof of Address: Proof of where they live is needed, like a driving license or bank statement.
• Translation Documents: If documents are not in English, a notarized or apostilled translation is needed.

Proof of Registered Office Address

The LLP must show proof of its office address during or within 30 days of registration. Here are the needed documents:

• Rent Agreement and NOC: If the office is rented, a rent agreement and a no-objection certificate (NOC) from the landlord are required.
• Utility Bills: A utility bill, like gas, electricity, or telephone, is needed. It should show the address, owner’s name, and not be older than 2 months.

Digital Signature Certificate

A Digital Signature Certificate (DSC) is needed for one partner. It’s used to digitally sign documents for LLP registration.

Having all the necessary documents, like proof of office address, PAN card, passport, NOC from landlord, and utility bills, makes the registration process easier. This ensures your LLP is set up correctly according to 2024 laws.

Registered Office of LLP and Change Therein

The registered office of an LLP is where all communications and notices are received. Every Limited Liability Partnership must have a registered office. This ensures smooth operations and legal compliance. The LLP agreement usually outlines how to change the registered office address.

If the agreement doesn’t mention it, all partners must agree to the change. This is necessary for any change in the LLP’s registered office.

Changing the registered office of an LLP requires following the right steps. This is especially true if you’re moving to a different state. If the LLP has creditors, their approval is needed before making the change.

Also, a public notice in a newspaper is required to inform everyone about the change. This is important for stakeholders.

To notify the Registrar of Companies about the change, Form-15 LLP must be filed within 30 days. This form needs proof of the new address. A supplementary agreement must also be prepared and filed within 30 days of the move.

It’s important to note that no physical filing is needed. The process is online. The LLP Act doesn’t specify a format for the public notice, but INC-26 is often used.

The Registrar of Companies has the final say in approving the change. After approval, all documents must be updated with the new address. Not doing so can lead to penalties for the LLP and each partner.

By following these guidelines, LLPs can smoothly change their registered office address. This keeps them in legal compliance and avoids penalties or legal issues.

Effect of LLP Registration

When a Limited Liability Partnership (LLP) is registered, it gets a special identity. This identity comes with many benefits that help the LLP grow and run smoothly. The LLP gets a unique number called the LLPIN. This number is key for all official talks and deals.

Separate Legal Entity Status

One big plus of registering an LLP is that it becomes its own legal body. This means the LLP has its own rights, debts, and duties. It can make deals, own things, and even go to court on its own.

“The certificate of incorporation shall be the conclusive evidence that the limited liability partnership is incorporated by the name specified therein.”

This legal status brings many benefits, like:

• Protection for partners’ personal stuff from LLP debts
• More trust and professionalism in business talks
• Easier management and ownership setup

Perpetual Succession

LLPs also get to keep going forever, even if partners leave or die. This is different from other businesses, where losing a partner can stop the business. An LLP keeps going, no matter who joins or leaves.

Having perpetual succession is great for LLPs because it means:

1. The business stays stable and long-lasting
2. Operations keep going smoothly, even with partner changes
3. It makes the business more appealing to investors

Designated partners are key to following the LLP Act rules. They handle all the paperwork and reports needed by law. This keeps things clear, fair, and in line with the rules.

In short, registering as an LLP brings big benefits. It gives the business a clear identity, protects partners, and keeps going forever. These advantages help the LLP grow, stay stable, and run smoothly. It’s a great choice for anyone wanting a flexible and legal business setup.

Provisions Relating to LLP Name and Changes

Every Limited Liability Partnership (LLP) in India must have “limited liability partnership” or “LLP” at the end of its name. The Central Government might say some names are undesirable. This means the LLP won’t be registered with that name.

The Central Government can ask an LLP to change its name. This is if the name is too close to another LLP, company, or trademark. The LLP agreement should say how to change the name. If it doesn’t, all partners must agree.

Here’s how an LLP changes its name:

1. Get approval for the new name by filing Form RUN-LLP with the Registrar of Companies (ROC).
2. After approval, file Form LLP-5 within 30 days. Include all needed attachments.
3. With ROC’s approval, you’ll get a new certificate of incorporation.

The approved name is reserved for 90 days. You must file Form LLP-5 during this time. Not following the rules can cause problems.

As per Section 19 of the LLP Act, 2008, an LLP may change its name for several reasons.

Changing an LLP’s name can be tricky. It’s wise to talk to experts. They can help you avoid problems and make the process smoother.

LLP Agreement and its Significance

The LLP Agreement is key for a Limited Liability Partnership (LLP). It outlines each partner’s role and duties. This agreement helps in making decisions and keeps the LLP running smoothly.

The Limited Liability Partnership Act, 2008, requires an LLP to have an agreement within 30 days. Not having one can cost Rs. 100 per day. The agreement must be filed with the Ministry of Corporate Affairs (MCA) using Form 3.

Key Clauses in LLP Agreement

The LLP Agreement must cover important partnership details. Key clauses include:

• Name and registered office address of the LLP
• Details of partners and designated partners, including their names and addresses
• Business objectives and proposed activities of the LLP
• Contribution of each partner and their respective profit-sharing ratios
• Rights and duties of partners in various scenarios, such as admission, resignation, retirement, cessation, or expulsion
• Rules and procedures for governing the LLP’s operations

This agreement helps in making decisions and avoids conflicts. It’s important to draft it carefully, considering the LLP’s goals and partners’ needs.

Stamping and Filing of LLP Agreement

After agreeing on the LLP Agreement, partners must pay the stamp duty. The duty amount depends on the State Stamp Act where the LLP is registered.

After paying the duty, the agreement must be signed by all partners and witnesses. Then, it’s filed with the Registrar of Companies (RoC) of the state, not the Central Registration Centre (CRC).

The LLP Agreement is crucial for an LLP’s success. By carefully drafting and filing it, partners ensure they understand their roles and the LLP’s operation.

Post-incorporation Compliances for LLP

After you set up your Limited Liability Partnership (LLP), you must follow some important steps. These steps help your business run smoothly and stay legal. You need to get key registrations, file annual reports, and keep your financial records up to date.

Obtaining PAN and TAN

LLPs need to get a Permanent Account Number (PAN) and a Tax Deduction and Collection Account Number (TAN). You can apply online or offline. You’ll need to use Form 49A for PAN and Form 49B for TAN. You’ll also need your Certificate of Incorporation.

LLPs must get their PAN and TAN within 30 days of starting.

Filing Annual Returns

LLPs must file annual reports with the Ministry of Corporate Affairs (MCA). You’ll need to submit two forms: Form 11 (Annual Return) and Form 8 (Statement of Account & Solvency). If you change your LLP agreement, you must tell the MCA right away.

The table below shows the main annual tasks for LLPs:

If your LLP’s capital or turnover is high, you must get your accounts checked by a Chartered Accountant. Then, you’ll need to send the checked financial statements to the MCA with your annual reports.

Also, if your LLP’s turnover is over a certain amount, you must register for GST. The GST registration limits are:

• Rs. 40 lakhs for businesses in general
• Rs. 20 lakhs for service providers
• Rs. 10 lakhs for businesses in North-Eastern states

LLPs also have to follow other rules, like:

• Keeping important registers, like the Register of Partners
• Using a special LLP bank account for all transactions
• Getting Professional Tax – Employer Registration within 30 days
• Registering under the State Shop and Establishment Act within 30 days

Not following these rules can lead to fines. For example, not filing your LLP agreement on time can cost Rs. 100 per day.

By knowing and following these rules, you can keep your LLP running well and avoid legal problems.

Penalties for Non-compliance

LLPs offer many benefits like flexibility and protection from liability. But, it’s key to follow the rules set by the Ministry of Corporate Affairs (MCA). Not doing so can lead to big penalties and even the end of your LLP.

The LLP Act, Section 74, says penalties can be from ₹10,000 to ₹5,000. Daily fees of ₹50 can add up. Making false documents is a big deal, with up to two years in jail and fines from ₹1 lakh to ₹5 lakhs.

One big part of being compliant is filing annual returns and other forms on time. Form 11 must be filed by May 30th each year. Not doing this can cost ₹100 per day, with no limit on the total penalty.

Not filing Form 8 on time also costs ₹100 per day. These fines are to keep your LLP in good shape.

Not following the rules can cost up to INR 5 lakh for LLPs. This is more than Private Limited companies. To avoid these fines, make sure to follow all rules and file on time.

Not following the rules can also mean your LLP could be shut down. If there are fewer than two partners for six months, it might end. Also, if your LLP can’t pay its debts, it could be dissolved.

To keep your LLP in good standing, get help from experts. They can help you understand and follow LLP rules. With the right help, you can grow your business without worrying about fines or dissolution.

Conclusion

Starting a Limited Liability Partnership (LLP) in India has many benefits. It offers flexibility in management and protects partners from big financial risks. Plus, it has pass-through taxation. The timeline for LLP registration is usually 15 to 20 working days, if everything is ready.

The online registration process, started in 2018, makes it easier to start LLPs. This is thanks to the Ministry of Corporate Affairs.

But, it’s important to think about your business type and possible downsides before starting an LLP. LLPs might find it hard to get money from angel investors and venture capitalists. They often want to invest in companies with shares.

Also, there could be more chances of disagreements among partners in LLPs. This is compared to other business types.

Even with these challenges, LLPs are still good for small to medium businesses, professionals, and startups. They offer a balance between being flexible and having some protection. By understanding the good and bad sides and following the rules, entrepreneurs can use LLPs to grow their businesses in India.