Understanding LLP Registration in India: Steps, Documents and Benefits

Over the years, the government has identified significant drawbacks and critical obligations associated with traditional business structures like partnerships and companies, making business operations challenging. To address these issues, the concept of Limited Liability Partnership (LLP) was introduced in 2008. 

An LLP is a legal entity that combines the benefits of both partnership firms and companies. It offers the flexibility of a partnership with the limited liability protection of a company, effectively addressing the shortcomings of these traditional structures.

Let’s explore in depth what is limited liability partnership, advantages of registering an LLP and the process for doing so.

What is LLP?

A Limited Liability Partnership (LLP) is a corporate structure that combines the limited liability of a company with the flexibility of a partnership. As a separate legal entity, an LLP continues to exist regardless of changes in its partners. According to the Limited Liability Partnership Act of 2008, an LLP must have at least two partners, one of whom must be Indian, but there is no maximum limit on the number of partners. 

The LLP agreement is a document that outlines the responsibilities and duties of each partner. However, no partner is held liable for the unauthorized actions of another; each partner is accountable for their own actions and obligations.

Why is it Important to Get LLP Registered?

Through one single registration, one can avail the benefits of both, a partnership firm and a company. 

• LLP registration is important if the companies have two or more designated partners or
• If the partners do not want a full-fledged company registration. 

Once a LLP is registered, the company bears its own losses and financial debts which makes the partners not liable for any financial losses or obligations. 

Advantages of LLP Registration

Following is a set of benefits you get once you register the LLP:

• Limited liability: LLP provides a protection shield to the personal assets of the partners by limiting their liability equal to their investment in the business. No financial liability obligation and any business loss shall not be taken care of by the personal assets of any partner. LLP bears its own losses.
• Control: LLP provides a higher control and flexibility to the partners to run the business and mutually decide the rules outlined in a LLP agreement. As per the needs, the operations can alter. 
• No Investment: Unlike alternatives, LLP does not require any initial investment which makes it an affordable option, especially for small businesses. LLP is also free from stamp duty charges and audit fees. 
• Credibility: If a business is registered it helps in gaining the consumer trust and building a credible brand reputation. An additional layer of authenticity is provided through registration. 

Features of Limited Liability Partnership

Below are a few points that indicate the nature and features of a LLP

• A LLP is a separate legal entity bearing all losses and enjoying its profits.
• The minimum required designated partners are 2, one of which should be an Indian. 
• There is no limit on the maximum number of partners.
• Each partner has a limited liability depending on their contribution in the business.
• The existence of a LLP is perceptual. 
• LLP works on an agreement, includes profit ratio, capital ratio etc. 
• No initial investment or capital is required.

What is the Eligibility Criteria for LLP Registration?

In order to register an LLP in India, it is important to meet the following requirements:

• There should be at least 2 partners, one of which should be an Indian.
• A partner should only be a person aging between 18 to 65 years
• A company or any other entity can not be a partner.
• Obtaining a DSC and DPIN is mandatory to register.
• The name should be unique and should not resemble an existing entity name.
• Every partner needs to agree to contribute capital in LLP. 

How to Register an LLP?

The Limited Liability Partnership Act 2008 has stated the procedure to register a LLP. Following are the steps you need to follow to register your LLP.

Step 1: Get a DSC (Digital Signature Certificate): A DSC refers to an online signature that is required during the registration. Since all the documents are submitted online, DSC ensures the authenticity of documentation. The designated partner is required to apply for a DSC through government-recognized certification agencies only such as MCA (Ministry of corporate affairs). It is advised to get category-3 DSC Certificate for enhanced security. 

Step 2: Apply for DPIN (Designated partner identification number): Each designated partner needs to have an unique identification number. If there is a change in partners, form DIR-3 should be filled with all the asked documents and signature of company secretary and the Chartered accountant.

Step 3: Reserve a LLP Name: Finalize a unique name through Reserve Unique Name-Limited Liability Partnership form (RUN-LLP). The official MCA website helps you with instructions you need to follow and you can also check for any resembling existing company. To get the approval, the name should be distinct from any existing entity or trademark. You can also propose 2 names, however, once a name gets approved, the incorporation should be applied within 3 months of receiving the approval through MCA. 

Step 4: Incorporation: For incorporation a form FiLLip should be filled and filed with the registrar having the jurisdiction of the state where you wish to situate the office. There is a fee as per Axenture ‘A’ that needs to be paid. Once the applied name gets approved, it now becomes the proposed name for the LLP.

Step 5: File for an LLP agreement: This agreement states the relationship between the LLP and its partners, the rules and regulations for partners. Within 30 days of LLP incorporation, Form 3 on the MCA portal should be filled. This agreement necessarily needs to be printed on stamp paper. 

Documents Required for an LLP Registration

To register LLP online or offline, below are the documents one must have:

Documents required for partners: 

• Personal Identification proof: PAN Card, Aadhaar Card, Voter ID Card, passport size photograph.
• Address Proof: Driving license, Bank statement, Utility Bills etc.
• Passport: Only incase of a NRI partner.

Documents required for LLP:

• Registered office proof: Documents such as utility bills (not older than 2 months), tax receipt, rent agreement.
• NOC from the landlord needs to be submitted. 
• Online verification: DSC, DPIN are required. 

Regulatory Framework for LLPs

By now, you know what is limited liability partnership, let’s now focus on the regulatory framework of LLP’s. 

MCA is responsible for the incorporation and overseeing of all the LLPs in India. Following are some key points LLP should keep in mind to comply with the statutory requirements.

• Annual Return: It is mandatory for LLP to file annual returns with MCA. The LLPs are required to submit 2 forms: Form 11 (Annual return) and Form 8 (Statement of account  & solvency) 
• LLP Agreement: If there is any change in the LLP agreement including capital contribution, partner composition or other alterations, it should be intimated to the MCA. 
• Audits: Audits are conducted to maintain the accuracy and reliability of the financial statement. The audits are required to be submitted with MCA.
• Tax Compliance: As per income tax department, it is mandatory for an LLP to file income tax returns and comply with GST regulations if turnover exceeds the threshold limit.
• Penalties: If any LLP does not comply with the statutory requirements, MCA gets the authority to impose penalties. It may also result in dissolution of partnership. 

LLP registration in India is a straightforward online process, typically completed within 15-20 working days, given the necessary documents and approvals. It suits small to medium enterprises, professionals, and startups by providing limited liability protection, flexibility, and tax advantages. However, consider potential drawbacks like limited fundraising options and higher risk of disputes. Evaluate these factors carefully before deciding on an LLP and share this information with colleagues for their benefit.