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A Limited Liability Partnership (LLP) is business form which provides benefits of limited liability and flexibility of a partnership business.It was introduced in INDIA by Limited liability Partnership Act,2008.It have features of both business entity as Corporation and a Sole Proprietorship.An LLP is better than Proprietorship firm,and it is simplest business firms to doing business in India.
Since LLPs are not capable of issuing equity shares, LLP should NOT be select for any business that has plans for raising equity funds from Angel Investors, Venture Capitalist or Private Equity Funds.LLP’s are administered by the Registrar of Companies.
The main reason for registering as an LLP is the limited liability. The partners of the firm are only liable for a small amount of debt incurred by it. This is entirely different from proprietorship and partnership where the personal assets of directors and partners are not protected if the business becomes bankrupt.
Minimum Requirement to Start an LLP
Minimum Two People: Minimum two partners are required to start an LLP. However, there is no limit on maximum partners.
No Minimum Capital: Capital in case of LLP is depending on the need of the business and contribution to partnership by partners. The Stamp Duty on the deed is based on the amount of capital.
Resident Person requirement: One Designated partner of LLP must be from India.
Unique Name: Name of the LLP should be unique, and it must not be same or similar to the name of any existing company, LLP or trademark which is registered or applied for.
Advantage of LLP
Limited Liability: Partners’ liability of the LLP is limited and it is limited only to their capital contribution by them to the LLP.
Minimal regulatory compliance: Regulatory compliance are very less in case of LLP as compared to company form of entity.
Separate Legal Entity: An LLP is a separate legal entity and a juristic person distinct from its partners and both can sue each other and be sued.
Continuity of existence of the LLP: Even after the death of the partner LLP continue its exist.
Property Ownership: LLP enjoys the right to own, enjoy and transfer property. The rights can be exercised by the LLP in its own name.
No Audit Requirement: There is no audit requirement up to turnover of less than 40 Lacs and capital contribution of less than 25 Lacs.
Transferability of ownership: The ownership of an LLP can be easily transferred to another person. However, transferee should be inducted as a Designated Partner of the LLP.
Taxation: Both Partners & LLP can give loan to each other. There is no dividend tax in case of LLP.
Documents Required
Latest passport size Photographs of all partners
PAN ( Permanent Account Number) of all Partners (Minimum 2)
Identity Proof of each partner, (Aadhar Card, Passport, Driving License or Voter ID Card)
Address Proof of all partners (Bank Statement or Passbook, electricity bill, telephone bill, Aadhar card or any utility bill)
Copy of Mobile bill, telephone bill, electricity bill or Bank Statement of all Partners with Present address
Registered Office Address Proof – Electricty Bill along with Rent Agreement / ownership proof of proposed registered office.
Stamp paper for LLP Agreement of State where LLP is to be Incorporated
Documents Must be self attested
Documents submitted must be valid and not more than 2 month old.
FAQS
Why LLP is Advantageous?
Forming and maintaining LLP has always been a preferred option for small
Enterpreneurs due to its structure, compliance and operational advantages.
what are Salient features of LLP?
LLP can be formed with minimum of 2 partners.
• LLP shall have at least two designated partners who are individuals.
• LLP is a separate legal entity.
• Liability of partners of LLP is limited to their contribution.
• There is less compliance as far as LLP is concerned.
• Every LLP is required to file Form 11 and Form 8 as part of their annual compliance.
• LLP can be registered in a short span of time within 15-20 days.
What is an LLP?
A Limited Liabilty Partnership firm (LLP) is a hybrid structure between a partnership firm & a private limited company where the business is carried out in a corporate framework, guided by terms of the mutually adopted partnership deed.
What are the advantages of registering as an LLP over general partnership firms?
Liability- In a general partnership firm, partners are personally liable for debts of the business which means that even their personal property may be used to settle the firm’s debts. Whereas, the liability of partners is limited in case of an LLP.
Immunity against wrong doings of other partners- Under LLP structure, partners are not responsible for negligence or misconduct of other partners whereas in general partnership firms, partners can be held responsible.
What is the minimum capital requirement for LLPs?
There is no minimum capital contribution requirement. It can be registered even with Rs. 100 as total capital contribution.
Does the Income Tax Act treat partnership firms and LLPs differently?
Both general partnerships and LLPs are taxed at flat rate of 30%.
All the other income tax act provisions apply similarly except that general partnership firms are covered under presumptive taxation scheme i.e if turnover is below Rs. 2 crore in business or Rs. 50 lakh in case of profession, there is no need to maintain books of accounts or get accounts audited whereas, LLPs are explicitly not covere
My details on my documents have a difference. Can I still incorporate my company using them?
You will need to have exactly the same details on all your documents to incorporate your company.
What is the audit requirement for LLP?
Accounts of an LLP are required to be audited when the turnover is Rs. 40 lakh or more or when the total capital contribution is Rs. 25 lakh or more.
The auditor of an LLP is appointed annually by the designated partners.
The first auditor is appointed before the end of the financial year. Subsequent appointment or reappointment of the auditors is made one month before the closing of the financial year by the designated partners.
Do I need to have any prerequisite documents to start an LLP?
Due to recent changes on MCA portal, incorporation of LLP can only proceed after 2nd October 2018 if any of the partners do not have DIN / DPIN.
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