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Limited Liability Partnership

Overview​ Naming Criteria Eligibility Documents Required – LLP Incorporation Documents Required – LLP GST Advantages & Disadvantages Annual Compliances FAQs

This type of company was introduced in India through the Limited Liability Partnership Act 2008. One of the biggest advantages of LLP over the traditional form of partnership is the presence of limited liability. The LLP formed is considered to be a separate legal entity from its members which makes the liability of the members limited to their share. Moreover, the incorporation process and the compliance process are simpler for this form of company.

LLP is favoured by Professionals, Micro and Small businesses which are family-owned or closely-held. An LLP also provides “limited liability protection” to the owners from the debts of the LLP. Accordingly, all partners in an LLP enjoy the benefit of limited liability within the partnership.

Naming Criteria of a LLP

  1. The name of an LLP should have a short, unique and meaningful name shall not be identical with or too nearly resembles the name of an existing company.
  1. No LLP shall have a name which, in the opinion of Central Government, is undesirable or the name proposed resembles any connection with Government or State patronage, unless prior approval of the Central Government is obtained.
  1. The name of the LLP shall not be one prohibited under the Emblems and Names (Prevention of Improper Use) Act, 1950.
  1. The name should not be such that its use by the company will constitute an offence under any law.
  1. The name should not be illegal or offensive.
  1. The name should not be misleading for the public.
  2. The words “Limited Liability Partnership” or “LLP” shall be mentioned with the name of such entity, wherever its name is printed, affixed or engraved, therefore, the total suffix will be “XYZ Business Services LLP” in case of a Limited Liability Partnership.

Eligibility for registering a LLP

    1. Only a natural person who is a resident of India can be a sole partner.
    2. Every LLP shall have at least 2 partners of 18 years and above and shall also have at least 2 individuals as Designated Partners, of whom 1 shall be resident in India.

    Minimum requirements of an LLP

    1. Minimum 2 partners.
    2. Minimum 2 individuals as Designated Partners.

    Note:-

    1. Partner & Designated Partner can be same person.

    Maximum requirements of an LLP

    1. Maximum partners can be unlimited

Documents/Details Required for Incorporation of Limited Liability Partnership (LLP)

Following documents is required: 

  1. Two identity proof of Partners – Copy of Aadhaar Card/ Voter ID Card/ PAN Card (compulsory).
  2. Address proof of the Partners (Voter ID, Passport, Driving license, etc.)
  3. Ownership and sale deed (In case your own premise) and one address proof of registered office (like water, telephone, mobile bill or copy of bank pass book or net banking statement mentioning address of the applicant).
  4. Name of the city where the registered office is located.
  5. Passport size photo of the proposed partners.
  6. In case the property is on rent then you need to submit a copy of the rent agreement with NOC from Landlord.
  7. Details of LLPs or Company in which partner is a director/partner.
  8. Occupation details, Email address, Contact details of directors as well as shareholders.
  9. Affidavits for non- acceptance.
  10. Subscriber sheets/ LLP Agreement including consent.
  11. Copy of Board resolution of the existing company or consent of existing LLP as a proof of no objection.
  12. DIN (Director Identification Number) of all partners.
  13. DSC (Digital Signature Certificate) of all partners.
  14. PAN Card of the LLP.

Also some other notable points are:- 

  • Authorised and paid-up Share Capital: capital can be taken as low as Rs. 1,00,000/- and as high as per the requirement. There is no lower or upper limit prescribed.
  • Activities of the proposed Company: List of proposed activities of the LLP under incorporation.

Documents/Details Required for GST Registration of Limited Liability Partnership (LLP) After Incorporation

  1. Proof of identity of all partners. Such documents include Aadhaar, PAN, Passport, Driving license or any other Government-issued identity document would be required.
  2. Bank account details. 
  3. In the case of leased property, the copy of lease deed for the registered office premises along with a NOC from Landlord and electricity bill/property tax receipt/water bill copy of the registered office property.
  4. In case of own property, copy of sale deed along with the electricity bill/property tax receipt/water bill copy of the registered office property.
  5. Registration Certificate of the LLP.
  6. Copy of board resolution
  7. Appointment Proof of authorised signatory.

Advantages

  1. Forming an LLP is an easy process. It is not complicated and time consuming like the process of a company. The minimum amount of fees for incorporating an LLP is Rs 500 and the maximum amount which can be spent is Rs 5600.
  1. The partners of the LLP is having limited liability which means partners are not liable to pay the debts of the company from their personal assets. No partner is responsible for any other partner misbehaves or misconduct.
  1. The life of the Limited Liability Partnership is not affected by death, retirement or insolvency of the partner. The LLP will get winded up only as per provisions of the act of 2008.
  2. There is no restriction upon joining and leaving the LLP. It is easy to admit as a partner and to leave the firm or to easily transfer the ownership of others.

Disadvantages

  1. Due to various tax benefits and provisions many states restricts the formation of LLP in their states. This leads to a disadvantage as many states don’t allow their entrepreneurs to form this
  2. One of the major demerits of Limited Liability Partnership is that many people do not consider this as a credible business. People still trust more on company or partnerships
  3. Partners of the Limited Liability Partnership don’t consult each other in case of decisions and agreement
  4. Though interest and ownership can be transferred but it usually takes long procedure. Various formalities are required to comply with the provisions of the act.

Annual Compliances as per Company Law and LLP Act of LLP

  1. Director KYC (DIR-3 KYC).

If the KYC is not filed before the due date, the DIN will be marked as ‘deactivated’ with reason as ‘non-filing of DIR-3 KYC’ and to make DIN active there is a requirement to pay a fine of Rs. 5000.

  1. Annual return in Form-11.

Should be filed Within 60 days from closure of each financial year i.e. 3oth  May.

In case of non-filing of form within the due date, Penalty of Rs. 100 per day is chargeable till the date of filing.

  1. Maintaining books of accounts.
  1. Statement of accounts & solvency in Form-8.

It is a declaration by the LLP to the ROC that the financial position of the LLP is sound and it is capable of paying its liabilities or debts. The key particulars of the financial statement of the LLP submitted to the ROC through the filing of Form-8.

The due date for filing LLP Form 8 is 30th October of each financial year.

In case of non-filing of form within the due date, Penalty of Rs. 100 per day is chargeable till the date of filing.

FAQs

A private company means a company, which has such minimum paid-up share capital as may be prescribed and which by its articles provide the following:- i. Restricts the right to transfer its shares; ii. Except is case of one person company (OPC), limits the number of its members to 200 excluding present and past employees who continue to be the members of the company (here joint members shall be counted as one); and iii. Prohibits any invitation to the public to subscribe for any securities of the company.

There should be at least two members and two directors in a Private Company.

There can be a maximum of 200 members and 15 directors in a Private Company.

Alteration of its articles thereby deleting the 3 restrictions, changing its name thereby deleting the word “private” from its name, increase the number of members to at least 7 and number of directors should be increased to at least 3.

A Private Company may convert itself into an OPC by passing a Special Resolution in the general meeting after obtaining NOC in writing from its members and creditors. The company shall file an application in Form INC-6 for its conversion into One Person Company.

Copy of Aadhaar Card, Voter ID Card, PAN Card (compulsory), Passport, Driving license, Water bill, Telephone bill, Mobile bill or Copy of bank pass book or Net banking statement mentioning address of the applicant, Passport size photo of the proposed director & shareholders, copy of the rent agreement with NOC from Landlord, PAN Card of the company, etc.

The cost could be anywhere between Rs. 6000 to Rs. 10000.

Yes, small business and start-ups get benefits of getting themselves registered as a private company. They get the advantage of credibility and good reputation in the eyes of big financial institutions, clients and suppliers. Also, they get easy loans from banks.

The person should meet the conditions like the minimum age of the person should be 21 and resident or citizen of India to become a shareholder or director of the company.

Any Foreign LLP can establish its place of business in India by filling Form 27 (Registration of particulars by Foreign Limited Liability Partnership (FLLP)). The eForm has to be digitally signed by an authorized representative of the FLLP.

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