An LLP is a kind of partnership in any type of business organisation in which all members have limited obligations. This means that no one partner is liable for another partner's losses, carelessness, or misbehaviour. This is characterised as a Limited Liability Partnership since all partners have limited and not an entire obligation. In addition, partners, unlike shareholders, have the authority to operate the firm. Because of these traits, LLPs appear to have characteristics of both corporations and partnerships.

In this blog, we will learn more about the LLP registration process, the documents required, and the LLP registration cost.

Limited Liability Partnership

In 2008, the idea of a Limited Liability Partnership (LLP) was established in India. An LLP combines the characteristics of a partnership firm & a corporation. In India, the LLP is supervised under the Limited Liability Partnership Act of 2008. An LLP must be formed with at least two partners. On the other hand, an LLP has no upper restriction on the number of partners it can have.

There should be a minimum of two approved partners who must be persons, with at least one of them residing in India. The LLP agreement governs the rights and obligations of chosen partners. Therefore, they are directly accountable for ensuring that the terms of the LLP Act, 2008 and the LLP agreement are followed.

Features of LLP

• It has its legal entity, much like a company.
• Each partner's responsibility is limited to the amount contributed by the partner.
• The formation of an LLP is inexpensive.
• Less regulation and compliance.
• There is no requirement for a minimum capital contribution.

Process of New LLP Registration The process of a new LLP Registration involves the following steps:  

Acquiring Digital Signature Certificate

The first stage in registering an LLP is to get digital signatures from all of the LLP's chosen partners. Because the LLP's paperwork is filed online, a digital signature is necessary. In addition, these documents have digital signatures, which aids in the certification process.

Apply for The Name Reservation

The applicant must get a Limited Liability Partnership-Reserve Unique Name (LLP-RUN) that may be processed at the Central Registration Centre to establish a prospective LLP. However, before mentioning or using the name, it is always advisable to check for a free name on the Ministry of Corporate Affairs (MCA) web. This will provide a list of firms with names that are the same or similar to the proposed LLPs. Once a name has been selected, the registrar will accept it as long as it is not similar to any already existing LLP. The LLP-RUN must be filed together with a fee before the registrar can approve it.

LLP Incorporation

• The incorporation form is FiLLiP, Form for Incorporation of Limited Liability Partnership, which must be filed with the Registrar of the state where the LLP's registered office is located. The form will be a combined form.
• Fees in accordance with Annexure 'A' must be paid.
• If an individual who is to be nominated as a designated partner does not possess a DPIN or DIN, this form allows them to apply for one.
• Only two people will be able to make an application for allocation.
• Reservation applications can also be submitted using FiLLiP.
• If the applied-for name is accepted, this authorised and reserved name will be used as the suggested name of the LLP.

File for The LLP Agreement

The LLP agreement covers the partners' mutual rights and responsibilities as well as the LLP's and its partners' respective rights and duties.

• The LLP agreement must be submitted electronically in Form 3 on the MCA Portal.
• Form 3 for the LLP agreement must be submitted within 30 days of establishment.
• Stamp Paper must be used to print the LLP Agreement. Stamp Paper has a varied value in each state.
   

Documents Required for LLP Registration

The documents required for LLP Registration are:

Documents of Partners

Partners' PAN Card/ID Proof

At the time of LLP registration, all partners must supply their PAN. This is because the PAN card serves as the primary form of identification.

Address Verification for Partners

Partners may present any one of the following documents: Voter ID, Passport, Driver's License, or Aadhar Card. The name and other facts on the address proof and PAN card should be identical. If the spelling of own name or father’s name or date of birth is different in the address proof and PAN card, it should be fixed before submitting to RoC.

Partners' Proof of Residence 

The most recent bank statement, telephone bill, mobile bill, or gas bill should be submitted as proof of residency. Such a bill or statement should be at most 2-3 months and should include the partner's name as it is on the PAN card.

A Photograph

Partner must also give a passport-sized image, preferably against a white backdrop.

Passport (for Foreign Nationals/NRIs)

Foreign citizens and NRIs must present their passports in order to become partners in an LLP. Passports must be notarized or apostilled by the competent authorities in the country of such foreign citizens and NRIs, or else the Indian Embassy in that country can sign the documents.

Documents of LLP

Proof of Registered Office Location:

Proof of registered office must be provided at the time of registration or within 30 days after incorporation.

A rent agreement and a landlord's no-objection certificate must be filed if the registered office is rented. In addition, the landlord's approval to enable the LLP to use the location as a "registered office" will be evidenced by a no-objection certificate.

Furthermore, any utility bill, such as gas, electric, or telephone bill, must be submitted. The bill should include the full address of the property as well as the owner's name, and it should be no more than two months old.

Certificate of Digital Signature:

Because the authorised signatory will digitally sign all papers and applications, one of the chosen partners must also get a digital signature certificate.

LLP Registration Cost

The LLP Registration cost is given below. The MCA has established the following fee slabs:

• 500/- to form a limited liability partnership with a capital commitment of less than 1 lakh.
• 2000/- for the formation of a limited liability partnership with a capital commitment greater than one lakh but less than five lakhs.
• 4000/- for the formation of a limited liability partnership with a capital commitment in excess of 5 lakhs but less than 10 lakhs -
• 5000/- for the formation of a limited liability partnership with more than 10 lakh in the capital.

Benefits of LLP Registration

The following are the benefits of an LLP Registration:

There is no obligation for a minimum donation

In an LLP, there is no minimum capital requirement. An LLP can be founded with as little cash as feasible. Furthermore, a partner's contribution might include

• Tangible, mobile or immovable property.
• Intangible property.
• Other advantages to the LLP.
• There is no fixed boundary on the number of business owners
• An LLP needs a minimum of two partners and has no upper limit on the number of partners. This is in contrast to a private limited corporation, which is limited to no more than 200 members.

Reduced registration fees

Compared to creating a private limited or a public limited business, registering an LLP is inexpensive. However, the cost of forming an LLP vs a Private Limited Company has recently decreased.

There is no obligation for a mandatory audit

Accounts must be audited for all firms, whether private or public, regardless of share capital. However, there is no such necessity in the case of LLP. This is seen as a significant compliance benefit. Only under the following circumstances is a Limited Liability Partnership necessary to have a tax audit performed:

• The LLP's contributions surpass Rs. 25 lakhs or
• The LLP's yearly revenue surpasses Rs. 40 lakhs.

Aspects of LLP Taxation

For income tax purposes, LLPs are regarded the same as partnership firms. Thus, the LLP is required to pay income tax, but the partners' shares in the LLP are not. As a result, no dividend distribution tax is due. The provision of a 'deemed dividend' under income tax legislation does not apply to LLPs. Section 40(b): Any payment of salary, bonus, commission, or compensation to partners is deductible.

Dividend Distribution Tax (DDT) is not levied

If the owners of a firm withdraw earnings from the company, the corporation must pay additional tax in the form of DDT at 15% (plus surcharge and education cess). However, in the case of an LLP, no such tax is payable, and the partners can simply take the earnings of an LLP.

Disadvantages of LLP Registration

The disadvantages of LLP Registration are as follows:

Non-compliance Penalty

Even if an LLP has no activity, it must file an income tax return and an MCA annual return each year. A penalty of Rs.100 per day performed is applied if an LLP fails to file for the Form 8 or Form 11 (LLP Annual Filing). However, if an LLP has not submitted its annual return for the past few years, the penalty has no maximum and might go into lakhs.

There is no obligation to file an annual return for a sole proprietorship or partnership company. As a result, only the Income Tax Act's penalty would be applied.

Inability to Invest in Equity

An LLP, unlike a corporation, does not have the idea of equity or ownership. As a result, angel investors, HNIs, venture capital, and private equity firms cannot become shareholders in an LLP. As a result, most LLPs would have to rely on the promoter and debt capital.

Increased Income Tax Rate

A corporation with a revenue of up to Rs.250 crores pays 25% income tax. (Further decreased in 2019 for new manufacturing enterprises.) On the other hand, LLPs are taxed at a 30% rate regardless of turnover.

Conclusion

There should be a minimum of two approved partners who must be persons, with at least one of them residing in India. The LLP agreement governs the rights and obligations of chosen partners. Therefore, they are directly accountable for ensuring that the terms of the LLP Act, 2008 and the LLP agreement are followed.

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