LLP Registration in India has become an alternative form of business that provides the advantages of a Company and the flexibility of a Partnership firm into a single organization. The Concept of LLP in India was introduced back in 2008 by the Limited Liability Partnership Act of 2008. This unique hybrid is suitable for setting up small, medium-sized businesses.
It is very easy to manage and incorporate a Limited Liability Partnership in India. To register an LLP minimum of two partners are required, there is no upper limit as such.
The LLP agreement states the rights and the duties of the Partners. In an LLP one partner is not responsible for the misconduct and negligence of the other partner. The partners are responsible for the compliances and all the provisions that are specified in the LLP agreement.
- A minimum of two partners are required.
- The Digital Signature Certificate is required for all designated partners.
- DPIN for all designated Partners.
- The name of the LLP should be such that it is not similar to the name of any existing LLP or Trademark registration
- Capital contribution by the Partners of the LLP.
- LLP Agreement between the Partners.
- Proof of registered office of the LLP.
ADVANTAGES OF LLP REGISTRATION IN INDIA
There are several reasons why people opt for LLP registration in India over Private Limited Company incorporation. LLPs are considered to be easier to set up and flexible form of business. Entrepreneurs find it feasible to start their organization as it is comparatively hassle-free in day-to-day operations. Here, we take a look at the various advantages of LLPs.
- Low registration cost: The cost of registering an LLP in India is comparatively lower than that of incorporating a public limited company or a private limited company.
- No requirement for minimum contribution: As an LLP can be formed with the least possible capital, there is no minimum capital requirement in the incorporation of an LLP.
- No limits on the owners of the business: An LLP requires a minimum of 2 partners but there is no such upper limit on the maximum number of partners. Whereas in a private limited company there are restrictions on having more than 200 members..
- No requirement of compulsory audit: Whether the company is public or private irrespective of its share capital is expected to get its account audited. But here in the case of LLPs, there is no such mandatory requirement and this is considered to be one of the significant compliance benefits of forming an LLP. A Limited liability company is supposed to get its audit done only in two cases.
- When the contribution of LLPs exceeds over Rs. 25 lakhs.
- When the annual turnover of LLPs exceeds over Rs. 40 lakhs.
- When the contribution of LLPs exceeds over Rs. 25 lakhs.
- Taxation aspect on LLP: LLP is liable for payment of income tax and the share of the partner is not liable to taxation. Thus, no Dividend Distribution Tax (DDT) is payable.
WHY PREFER LLP OVER PARTNERSHIP?
The main purpose of introducing LLP in India is to introduce a form of business that provides limited liability to the owners and is comparatively easy to manage and hassle-free. It is an alternative to Partnership firms. Here, we take a look at the major differences between an LLP and a partnership firm.
- Limited liability: In an LLP the partners are not responsible to the creditors externally. Hence, the partners are liable to the extent of their contribution to the LLP. On the contrary, in the case of a partnership firm the partners are personally responsible to the creditors. Because of this entrepreneurs may deny being partners in the partnership firm. In an LLP the partners enjoy limited liability protection.
- The number of partners: LLP and partnership firms both must have a minimum of 2 partners. However, there is no upper limit in the number of partners in an LLP. Just in case the number of partners reduces below 2 in a partnership firm due for any reason the firm would stand dissolved. Whereas in the case of LLPs if the number of partners reduces below 2, the sole partner can find a new partner without actually dissolving the LLP.
- Central vs State Government: An LLP can shift its registered office and open a bank account anywhere in India as it is registered under the Ministry of Corporate Affairs of India. The Registrar of firms that registers the partnership firms are controlled by the state government. Hence, it is more tedious to operate or move across India with Partnership firms.
- Members: Members can be added to LLP during incorporation or post incorporation. The following persons can be partners in LLP:
- Limited liability partnership
- Foreign Limited Liability partnership
- Foreign Companies
WHAT MAKES AN LLP DIFFERENT FROM A PRIVATE LIMITED COMPANY?
Entrepreneurs starting a new business are always curious to know the difference between a Private Limited Company and an LLP, as both of them offer similar features. Here's the comparison between a Private Limited Company and an LLP from an entrepreneur's perspective for starting a new business.
Difference between LLP and Company can be analyzed on parameters such as Business Formation and Legal Status, Business Risk on Personal Assets, Acceptance and Credibility, Attracting Investments, Tax and Legal Compliances, and Startup advantages, Business Succession. etc.
POST-INCORPORATION COMPLIANCES OF LLPS
Following are the compliances that an LLP must follow every year.
- Income tax return:Income tax return using form ITR 5 must be filed by the LLPs. Form ITR 5 can be filed online through the income tax website using the digital signatures of the designated partner.
- MCA annual return: The LLP Form-11 should be due on or before the 30th of May each year. Form 11 contains the details of the number of partners, total number of partners, total contribution received by all partners, details of body corporate as partners, and summary of the partners. The LLP Form- 8 must be filed within 30 days from the end of the 6 months of the respective financial year along with some prescribed fees. Hence, LLP form 8 must be filed before the 30th of October of each financial year.
In addition to this, GST registration, GST return filing, and TDS return filing would be required for the LLP based on the sales and turnover.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.