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    What Exactly Is An LLP?

    A Limited Liability Partnership is a form of business structure that provides you with the advantages of a corporation and the adaptability of a Partnership firm. Therefore, a Limited Liability Partnership (LLP) is a mix of a Partnership business and a corporation. 2009 was the year that the business world was first exposed to the LLP, which was made possible by the Limited Liability Partnership statute of 2008. The most outstanding candidates for this novel combination of two business models are companies of a small or medium size.

    Since its inception, India has seen more than one lakh registrations, which may be attributed to the adaptability and convenience of the incorporation process. To form an LLP, you need at least two partners, although no maximum number of partners is allowed. The fact that one partner is not accountable for the actions of the other partners is the significant advantage offered by the limited liability partnership (LLP). Each partner's agreement governs how their rights and responsibilities relate to one another.

    However, LLPs are unable to issue equity shares because of their structure. Anyone thinking of raising equity financing for the company should completely disregard LLP.

    LLP Registration Process

    • Through the website of LegalTaxPert, you will be able to send in the data in an electronic format.
    • The digital signatures will begin after it has been determined that the papers are valid.
    • Following the digital signature certificate presentation, the applicant will be required to complete the OTP verification procedure and the Video KYC check.
    • A request must be submitted to the Ministry of Corporate Affairs (MCA) to secure the name for the limited liability partnership.
    • After we have received all of the necessary papers, we will write the same for the incorporation, and then we will send them out to all of the partners to be signed.
    • Remember to submit a copy of the papers to LegalTaxPert so that we may have a look at them.
    • The MCA will take between 2-5 working days to verify the signed papers once they have been submitted.
    • The drafting of an LLP partnership deed will take place as part of creating a bank account. Within 25 days, the partnership agreement must have all partners' signatures and be submitted on our website.
    • After the engagement manager has completed their review of the signed deed, it will be posted into the MCA web portal within the first thirty days of the company's establishment.
    online LLP registration

    Documents Required for LLP Registration

    The following documents are required for registering a limited liability partnership:

    • PAN card
    • Additionally, the applicant's passport, if they are a non-citizen.
    • Documentation of one's identity issued by the state, such as an Aadhaar card, a driver's license, a resident card, or an electoral card.
    • Telephone or power bill that is no older than three months, if possible.
    • Evidence of Your Company's Registered Address
    • A letter of permission from the landlord to use the space for a registered business must include the landlord's name on either the energy or gas bill or the sale deed. This document is called a No Objection Certificate (NOC).
    • Proof of address and the owner's name must be included with any document less than two months old.

    What Sets A Limited Liability Partnership Apart From A Private Limited Company?

    Since both Limited Liability Partnerships and Private Limited Companies have many of the same characteristics, many business owners are perplexed and want to know the distinctions between the two. Examine the following to have a better understanding of the differences between LLP and PVT Ltd companies:

    1. The Registration Process –  Although the registration processes for a Limited Liability Partnership (LLP) and a Private Limited Company are similar, there are some critical differences in the paperwork and forms that are necessary for incorporation.
    The following are the stages involved in the process of incorporating an LLP or a private limited company:

    • Certificates of Electronic Signatures for the Directors Being Considered.
    • Director Identification Number for the candidates being considered for directorships.
    • Get the name of the approved company from MCA.
    • Putting in an application to incorporate.

    The Ministry of Corporate Affairs of the Central Government is responsible for registering both limited liability partnerships (LLPs) and private limited companies (PLCs). Both companies may expect the incorporation procedure to take between 15 and 20 working days.

    2. Less Expensive Registration – The cost of registering an LLP is much lower than registering a Private Limited Company. This is because the LLP was created primarily to assist in the operation of smaller enterprises. In addition, compared to the requirements for registering a private limited company, a limited liability partnership (LLP) needs a smaller number of papers to be printed on non-judicial stamp paper.

    3. Characteristics – Each company operates as an independent legal entity from its promoters and maintains its own set of assets and obligations. While both organizations may have their ownership transferred, a Private Limited Company provides more options for how privilege can be shared or changed than a regular corporation does.

    4. Ownership – In a limited liability partnership (LLP), each partner acts as the owner to manage and run the LLP company. As a result, a partner in an LLP plays an essential role in the business's ownership and management. Private Limited Companies provide their promoters more freedom in ownership and ownership sharing than other business structures do.

    5. Obligation to Comply – The obligations to comply with taxes for both businesses are comparable. Regarding complying with the Ministry of Corporate Affairs requirements, LLPs have several advantages over other companies.

    It is unnecessary to have audited financial statements for a limited liability partnership (LLP) if the yearly sales are less than Rs. 40 lakh and the capital investment does not exceed Rs. 25 lakh. On the other hand, an LLP would be required to submit LLP Form 8 in addition to LLP Form 11.
    On the other hand, a Private Limited Company is required to submit an annual return to the Ministry of Corporate affairs at the end of each fiscal year.

    Perks of Using a Limited Liability Partnership

    Independent juridical entity
    Like businesses, a limited liability partnership (LLP) functions as its independent legal entity. The LLP is separate from its partners in every way. An LLP can bring and defend legal actions in its name. Customers and vendors are confident in the company thanks to the contracts being signed in the name of the LLP. This helps to earn the trust of the many stakeholders involved in the business.

    Limited legal responsibility on the side of the partners
    The LLP provides its partners with limited liability protection. The partners' contributions serve as a restriction on the extent of their legal responsibility for the business. This indicates that they are solely responsible for paying back the number of contributions they have made, and they do not have any personal liability for any losses sustained by the company. When a limited liability partnership (LLP) is being wound up, the only assets responsible for paying off the obligations of the LLP are those assets. Since the partners do not have any personal responsibilities, they are free to conduct themselves as reputable businesspeople and may act as they like.

    Low costs and a reduced amount of compliance
    The cost of founding a limited liability partnership (LLP) is relatively inexpensive compared to creating a public or private limited business. The LLP also has a limited number of compliance that needs to be observed. The limited liability partnership is only required to submit two statements on an annual basis, namely an Annual Return and a Statement of Accounts and Solvency.

    No necessity for a minimum capital contribution
    There is no required minimum amount of money to start up the LLP. Before proceeding with incorporation, possessing a minimum amount of paid-up capital is not necessary and is not a necessity. It can be established with the partners contributing any amount of money.

    The LLP has several disadvantages, including a penalty for non-compliance
    The compliance that is expected to be followed by LLP is relatively light. However, the LLP will be subject to a significant financial penalty if these compliances are not fulfilled by the specified deadline. Even if the limited liability partnership (LLP) does not engage in any business throughout the year, it is nevertheless obliged to submit yearly reports to the Ministry of Corporate Affairs (MCA). The limited liability partnership (LLP) will be subject to a significant fine if it fails to submit the required returns.

    Proceeding with the winding up and dissolution of the LLP
    There must be at least two partners to establish a limited liability partnership (LLP). The limited liability partnership (LLP) will be dissolved after six months, in which the minimum number of two partners has not been met. If the LLP is unable to satisfy its obligations, the company could be dissolved.

    Challenges encountered in obtaining funding
    In contrast to a corporation, a limited liability partnership (LLP) does not use the terms “equity" or “shareholders." Angel investors and venture capitalists are not allowed to become shareholders in a limited liability partnership (LLP). This is because the shareholders have to be partners in the LLP and assume all of the duties that come along with being a partner. Therefore, angel investors and venture capitalists would instead put their money into a firm than into an LLP, which makes it harder for LLPs to obtain financing.

    Ownership Of LLP By Foreign Entities

    The automatic route was open to 100% foreign direct investment. Where there are no FDI-linked performance restrictions and where there is also permission for 100% FDI investment, businesses and activities may receive unrestricted foreign direct investment (FDI). It is now possible for citizens of other countries to invest in the LLP.

    Before 2015, investments in LLP by non-resident Indians and other foreign persons required prior authorization from the government. Because it is time-consuming and costly, non-resident Indians and foreign nationals often choose to register a corporation rather than invest in a limited liability partnership. But as of right now, because of the adaptability of FDI laws, it is simple for foreign nationals to form their LLP.

    LegalTaxPert is the company that will assist you in obtaining ownership of your LLP.

    Post-Incorporation Compliances For Limited Liability Partnership

    LLPs are required to submit the Income Tax Return by filling out form ITR 5. Partners in a limited liability partnership (LLP) can access the digital signature section of the Income Tax website online and utilize the signature of any one of their colleagues.

    MCA Before the end of the fiscal year on May 30th, you need to fill out your Annual Return using Form 11. Information such as the number of partners, the total number of partners, the contribution received by each partner, details about the corporate body, and a summary of all the partners are included in this document. In addition, Form 8 shall be submitted no later than 30 days after the conclusion of the fiscal year's first half. When you fill out form 8, you will need to pay any specified costs—complete Section 8 of Form 8 by October 30th of each year.

    In addition, the LLP must submit a TDS report, register for GST, and file GST returns. The yearly sales and turnover are the foundation for all of these considerations.

    LegalTaxPert will assist you in completing all your post-incorporation tasks on schedule and without committing any law violations.

    FAQs(Frequently Asked Questions)

    How many partners are needed to form a limited liability partnership?

    The minimum number of partners required to form a limited liability partnership is two. However, an LLP may begin operations with any number of partners.

    What are the steps involved in becoming a partner in an LLP?

    It is required that a person be older than 18 years of age. The Limited Liability Partnership (LLP) Act of 2008 permits international persons and foreign corporations to form an LLP in India. However, they need to have at least one Indian partner.

    How much capital is required to start an LLP?

    Starting a limited liability partnership (LLP) does not need a minimum amount of money. A partner may purchase either physical or intangible property as an investment.

    What exactly is meant by the term "Digital Signature Certificate"?

    The sender may be electronically identified using a Digital Signature Certificate. The Ministry of Corporate Affairs (MCA) has made it mandatory for all partners to sign their documents digitally.

    What are the key distinctions between a limited liability partnership (LLP) and a partnership firm?

    For an LLP to legally do business, it must first register under the LLP Act. Under the Partnership Act of 1932, however, the registration of a partnership business may be done so on a discretionary basis. In a limited liability partnership (LLP), each partner's liability is capped to the amount of the partner's contribution to the business. However, when a company is organized as a partnership, each participant is individually responsible for the firm's losses and obligations.
    Because the LLP is its distinct entity in the eyes of the law, it can make financial transactions, bring legal actions, and defend itself against such measures in its own right. Partnership businesses can't make legal claims or purchases in the name of the partnership itself. Because the partnership firm does not have its distinct legal organization, it must be done under the name of the authorized partner.

    Do MOA and AOA need to be completed for LLP?

    Not at all; the Memorandum of Association (MOA) and the Articles of Association (AOA) are both essential company papers that must be submitted for a business to register under the Companies Act of 2013. The LLP agreement, not the MOA or AOA, serves as the governing document for the LLP. As a result, an LLP is exempt from the need to create the MOA and AOA. It is responsible for drafting the agreement for the LLP.

    Should a limited liability partnership have directors?

    A limited liability partnership (LLP) does not have any directors. It is not required for a limited liability partnership (LLP) to have directors or a board of directors. Its partners run a limited liability partnership (LLP). The partners are the ones who decide how the LLP should run its operations and conduct its business. As a result, a limited liability partnership (LLP) always has to have a minimum of two partners.

    What exactly is a DPIN?

    The MCA will provide an Appointed Partner Identification Number (DPIN), a one-of-a-kind number, to the partner designated to represent the LLP. The Director's Public Information Number (DPIN) functions analogously to a corporate director's Director Identification Number (DIN). When creating a limited liability partnership (LLP), a DPIN may be acquired for any individual. Alternatively, a person can apply for a DPIN later to become a designated partner of an existing LLP.

    What prerequisites for becoming a designated partner in a limited liability company (LLC)?

    In a limited liability partnership (LLP), a designated partner may be any individual who agrees to the designation and acts in line with the LLP agreement. A corporate body can't be a designated partner. If a clause allowing for this is included in the LLP agreement, then any partner in the LLP may be selected as a designated partner.

    Who qualifies to be a member of an LLP?

    A person or a corporation may fulfill the role of a partner in a limited liability partnership (LLP). One cannot be a partner in a limited liability partnership (LLP) if one is a minor, not of sound mind, or an undischarged insolvent.