Limited Liability Partnership

What is a Limited Liability Partnership?

A Limited Liability Partnership (LLP) is a legally recognized business structure introduced in India under the Limited Liability Partnership Act, 2008. It combines elements of both a traditional partnership and a corporate entity, allowing for a partnership-based management framework while providing limited liability protection to its partners. An LLP is a separate legal entity, distinct from its partners, and can enter into contracts, own property, and sue or be sued in its own name.

Why has the Limited Liability Partnership (LLP) become a go-to choice for businesses in recent years?

The LLP stands out by offering partners limited personal liability, shielding their assets from business risks, while providing operational flexibility similar to a traditional partnership. This combination makes it an ideal choice for professionals, startups, and small businesses looking to balance risk management with ease of operation. By avoiding the complexities of corporate structures, LLPs offer a simplified, yet reliable, approach for entrepreneurs seeking the benefits of both partnerships and companies.

What are the key features of Limited Liability Partnership?

Separate Legal Entity

An LLP is considered a separate legal entity, distinct from its partners. This means it can own assets, enter into contracts, and initiate or face legal proceedings in its own name.

Limited Liability

The liability of each partner in an LLP is limited to the amount they have contributed to the business. This protects personal assets from being used to cover the LLP’s debts or liabilities.

Flexible Management Structure

Unlike companies, LLPs do not have a rigid management structure. Partners can directly manage the business or appoint designated partners to do so, as outlined in the LLP agreement.

No Maximum Limit on Partners

An LLP can have any number of partners, with no upper limit, providing greater scope for expansion and collaboration.

Perpetual Succession

The LLP continues to exist irrespective of changes in partnership. The death, retirement, or exit of any partner does not affect its continuity.

Easy Transfer of Ownership

Partners in an LLP can easily transfer their rights and ownership, unlike in traditional partnerships where transferring interest can be complex.

Lower Compliance Requirements

LLPs are subject to fewer regulatory requirements compared to private limited companies. While certain filings and disclosures are necessary, they are generally less stringent.

Tax Benefits

LLPs are taxed as partnerships, which means profits are taxed at the LLP level, and there is no double taxation as in the case of companies that must pay tax on dividends.

Who Can Opt for a Limited Liability Partnership (LLP) Structure?

The Limited Liability Partnership (LLP) structure is ideal for a diverse range of entities and individuals. It is particularly suitable for small and medium enterprises, family businesses, and groups of individuals, as they can pool resources and protect personal assets from business liabilities. Additionally, non-resident Indians (NRIs) can participate in LLPs as long as at least one partner is a resident of India.

However, certain entities, such as non-banking financial businesses, those involved in overseas direct investment, and multidisciplinary firms—including Chartered Accountants, Company Secretaries, and Cost Accountants—must adhere to specific laws and regulations to register as Limited Liability Partnerships (LLP) in India. These regulations ensure compliance with industry standards and regulatory frameworks.

What are documents needed for Limited Liability Partnership registration?

Identity Proof:

1. Aadhar card, Passport, Voter ID, or Driver's License of each partner or PAN Card.

Address Proof:

1. Utility bill, Bank statement, or any government document showing the address of each partner.

Photographs:

1. Recent passport-sized photographs of all partners with white background.

Proof of Registered Office Address:

1. Rental agreement or lease deed if the office is rented, or the title deed if owned, along with a NOC (No Objection Certificate) from the owner if the premises are rented.

Digital Signature Certificates (DSC):

1. Digital signatures of designated partners are required for filing documents electronically.

Proof of Registered Office Address:

1. Rental agreement or lease deed if the office is rented, or the title deed if owned, along with a NOC (No Objection Certificate) from the owner if the premises are rented.

What is the procedure for registration of a Limited Liability Company?

Obtain Digital Signature Certificate (DSC)

The partners must acquire a DSC, as all LLP documents need to be digitally signed.

Avail our Digital Signature Certificate (DSC) services at JKstartup360 today! Visit our DSC Guide to learn more.

Apply for Designated Partner Identification Number (DPIN):

All designated partners must apply for a DPIN by submitting the necessary application form along with identity proof. This number is essential for the registration process.

Reserve Your LLP Name

The LLP’s name must be unique and not similar to an existing business. The Registrar of Companies (ROC) will approve the name if it meets the required criteria.

Draft the LLP Agreement

An LLP agreement lays out the partnership terms, including capital contributions, roles, responsibilities, and profit-sharing. This agreement must be signed and submitted to the ROC within 30 days of incorporation.

File Incorporation Documents

The incorporation documents, including the LLP agreement, must be filed with the Registrar. Once approved, the LLP is officially formed, and you will receive a Certificate of Incorporation.

What are the post registration Compliances for Limited Liability Company?

Post-registration compliance for a Limited Liability Company (LLC) involves essential steps to ensure ongoing regulatory adherence and proper operational setup.

PAN and TAN Application: An LLC must obtain a Permanent Account Number (PAN) for taxation purposes and a Tax Deduction and Collection Account Number (TAN) if it will be deducting taxes at the source.

Bank Account Opening: After receiving the Certificate of Incorporation and PAN, an LLC must open a bank account in the company’s name to handle its financial transactions.

GST Registration: If the LLC’s turnover exceeds the GST threshold or it engages in interstate trade of goods and services, obtaining a Goods and Services Tax (GST) registration is necessary.

What are the Disadvantages of LLP?

a. Complex Dissolution:

Dissolving an LLP can be more complex compared to other business structures.

b. Limited Capital:

Raising capital may be challenging compared to corporate structures.

c. Conversion Restrictions:

Converting an LLP to a private limited company involves certain complexities.

d. Annual Compliance:

LLPs are required to comply with annual filing and audit requirements.

How can JKstartup360 help?

At JKStartup360, we simplify the LLP registration process for entrepreneurs. Our expert team assists in:

1. Acquiring Digital Signature Certificates (DSC) and Designated Partner Identification Numbers (DPIN).
2. Ensuring name approval and drafting LLP agreements aligned with your business model.
3. Filing incorporation documents and securing the Certificate of Incorporation.
4. Offering post-registration compliance support, including GST registration, annual returns, and financial statements.

Partner with JKStartup360 for hassle-free LLP registration in India and get started on your business journey today!