Limited Liability Partnership (LLP) Registration in India: Step-by-Step Guide

Limited Liability Partnership (LLP) Registration in India: A Step-by-Step Guide for 2024

Table of Contents

  • Introduction
  • What is an LLP?
  • Advantages and Disadvantages of an LLP
  • LLP vs Partnership: Key Differences
  • Documents Required for LLP Registration
  • LLP Registration Process Step-by-Step
    • Digital Signature Certificate
    • Designated Partners
    • Apply for DIN
    • Apply for LLP Name
    • Prepare LLP Agreement
    • File LLP Registration Documents
    • Obtain Certificate of Incorporation
    • Make a Seal/Stamp
    • Open a Current Bank Account
    • Register for TAN and GSTIN
    • Additional Compliances
  • LLP Registration Cost Breakdown
  • Role and Responsibilities of Designated Partners
  • Conclusion
  • FAQs on LLP Registration

Gone are the days of traditional partnership and sole proprietorship businesses in India. Today, the Limited Liability Partnership (LLP) model offers an attractive alternative for entrepreneurs and small business owners.

An LLP combines the flexibility of a partnership with the advantages of limited liability of a company. This simple yet powerful hybrid structure has made LLPs immensely popular in recent years.

But how exactly do you go about registering an LLP in India? What documents do you need? And what are the compliance requirements post registration?

This comprehensive guide answers all such questions in depth. So whether you’re just starting out or planning to convert your existing business into an LLP, you’ll find this article helpful.

Let’s get started!

What is a Limited Liability Partnership (LLP)?

An LLP essentially provides the benefits of limited liability of a company while allowing its members the flexibility of organizing their internal structure as a partnership based on a mutually arrived agreement.

Here are some key characteristics of an LLP in India:

  • Separate legal entity from its partners/members
  • Governed by LLP Agreement between partners
  • Requires minimum two partners and two designated partners
  • Limited liability protection to partners
  • No requirement to maintain statutory minimum capital
  • Flexibility in ownership transfer
  • Easy to dissolve

So in a nutshell, an LLP provides the twin benefits of separate legal status and flexibility of a partnership – the best of both worlds.

This makes the LLP structure ideal for small business owners, startup founders, consultants, professionals and enterprises who wish to conduct business without onerous company-like compliances.

Having understood what an LLP means, let’s look at some of its major advantages and disadvantages before moving on to the registration procedure.

Key Benefits or Advantages of an LLP

Limited Liability for Partners: The biggest advantage of an LLP is limited liability for its partners. Personal assets of partners are protected from any business-related debts and external claims. Maximum liability is up to their agreed capital contribution.

No Requirement for Statutory Audit: LLPs are exempt from mandatory statutory audit if annual turnover does not exceed ₹40 lakhs or contribution does not exceed ₹25 lakhs. This results in cost savings.

Simple Compliance Requirements: Very few annual filing and disclosure requirements for LLPs compared to private limited companies. No need to conduct board meetings. Provides operational flexibilities to partners.

Low Cost Incorporation: Cost of incorporating an LLP is significantly lower with fewer procedural requirements compared to a private limited company. No stamp duty or government fees on registration.

Flexibility in Ownership Transfer: Unlike a private/public limited company, there is no restriction on transfer of ownership in an LLP. New partners can be admitted without any hassles.

Easy to Dissolve/Wind-up: An LLP is relatively easier to dissolve compared to a company. Only filing of a statement with the ROC is sufficient to initiate dissolution while ensuring limited liability.

Global Recognition: LLP structure is recognized worldwide. Makes it easier to attract foreign partners, capital and conduct international trade. Supports business expansion plans.

Scalability: An LLP structure is suitable for both small and big businesses. Provides room for unlimited partner addition while retaining features of partnership and corporate structure.

Taxation Benefits: Certain taxation benefits are available for LLPs including no dividend distribution tax, lower corporate tax rates if turnover is below Rs 1.5 Cr. and avoidance of double taxation.

Key Disadvantages or Limitations of LLP

No Separate Fund Raising Options: Unlike a company, an LLP cannot raise funds from the public by issuing shares and debentures. Dependent only on partners’ investments and loans.

Ambiguity in Some Operational Aspects: While an LLP agreement governs partner rights and duties, some aspects like registration of charges and bankruptcy proceedings are still ambiguous compared to companies.

Higher Tax Compliance Burden: If annual turnover exceeds Rs. 1.5 crore, LLPs lose several tax exemptions meant for small businesses. Tax rates increase with higher revenues.

Lower Brand Value Perception: LLP tag may not carry the same credibility and brand positioning compared to a private limited tag from customer perspective.

Lack of Clarity on Residual Mechanism: In case of dissolution, the LLP Act does not adequately clarify subsequent asset/liability distribution mechanism amongst partners.

Restriction on Business Activities: LLP structure cannot undertake certain business activities such as non-banking financial services, insurance broking etc. without RBI and IRDAI’s approval respectively.

So while LLPs have multiple advantages, partners should also consider a few limitations before opting for it. Having an LLP may not suit all kinds of businesses and stakeholder needs.

LLP vs Partnership Firm: Major Differences

Now that you know the basics of an LLP, you may be wondering how it differs from a traditional partnership firm.

Here is a quick comparison:

BasisPartnership FirmLLP
RegistrationNo separate registration requiredSeparate registration with ROC mandatory
Legal StatusPartners jointly constitute the firm, no separate legal standingIndependent legal entity, separate from its partners
Liability ProtectionUnlimited personal liability except for limited partners in limited partnershipsLimited liability shield available to all designated and other partners based on LLP agreement
Ownership ChangesConsent of all partners required for changesEntry/exit of partners allowed with mutual consent based on LLP Agreement
DissolutionDissolution possible only by consent of all partnersDissolution relatively simpler based on LLP Agreement clauses
CompliancesVery limited compliancesMore compliances compared to partnership but significantly lower than a company
Funding OptionsLimited funding optionsWider external funding sources
Credibility & BrandingLower credibilityHigher credibility and branding due to mandatory registration

So in summary, an LLP offers more operational flexibility with higher business credibility and limited liability benefits compared to a conventional partnership firm.

With the basics out of the way, let’s deep dive into the step-by-step process for LLP registration.

Documents Required for LLP Registration

To incorporate an LLP in India, you need to submit certain documents to the Registrar of Companies (ROC).

Here are the key documents required for LLP registration in India:

  • DIN and DSC – For designated partners
  • Self-attested PAN cards of partners
  • Aadhaar cards of partners
  • Residential address proofs of partners
  • Registered office address proof (rental agreement plus NOC/utilities bill)
  • Business activity proof
  • Name approval confirmation
  • LLP agreement (Form 3)
  • LLP Form 2 – Incorporation document signed by partners with annexures
  • Signed affidavits and consent letters from designated partners
  • Subscriber’s sheet with capital contribution details
  • Form for appointment of designated partners

Additionally, a private limited company or LLP can also act as designated partner if they have turnover/net worth as prescribed by MCA.

While this may seem a lot of documentation, don’t worry – our experts at Filingwala will handhold you through this process.

With the required LLP registration documents in order, here is a blow-by-blow account of the step-by-step LLP registration process in India:

Step-by-Step LLP Registration Process in India

Step 1) Apply for Digital Signature Certificate (DSC)

The first step is for the proposed designated partners to obtain Class 2 Digital Signature Certificates (DSC). This will be required for digitally signing all LLP registration documents. Two types of DSCs can be obtained:

  1. With ePass 2003 standard
  2. With enhanced ePass 2003 standard

We recommend going for option 2 i.e. enhanced DSC as it is more advanced encryption method for better security.

DSC application requires identity and address proof submission along with physical verification. The cost of a DSC comes to around ₹2,500 per designated partner from authorized agencies like TCS, MTNL, NIC etc.

The DSC will be issued usually within 2-3 business days.

Step 2) Identify Designated Partners

As per LLP Act 2008, every LLP should appoint at least two designated partners who are responsible for compliance and administrative requirements just like directors in a company.

There is no limit on maximum number of designated partners. Apart from individuals, a body corporate can also be appointed as DP in LLP provided:

  • It has a net worth of ₹5 lakhs or more OR turnover of ₹5 crores or more during the last financial year
  • It submits required documents like board resolution, authorization letter, NOC etc. along with DP identification no.

Designated partners should be 18+ years old, mentally sound, and not disqualified under the Companies Act 2013. Their consent is mandatory even for resignation.

Step 3) Apply for Director Identification Number (DIN)

After appointment, the next step is for every designated partner (DP) to obtain a unique, life-long Director Identification Number (DIN). This serves as an identity proof for directors and designated partners across all organizations where they hold such positions.

To apply for DIN online an individual needs to provide their:

  • Full name
  • Gender
  • Nationality
  • Date of birth
  • Father’s name
  • Permanent address
  • Passport no. (in case of foreign nationals)

Along with self-attested copies of PAN card and Aadhaar card.

DIN application can be made online at the MCA portal instantly through DSC authentication. Physical documents verification happens post application.

There is no DIN application fee for Indian nationals. For foreign nationals and NRIs it is USD 100.

Step 4) Apply for LLP Name Approval

In parallel to DIN application, you can apply for LLP name approval from ROC. The process takes 3-5 working days.

Some guidelines on selecting a suitable LLP name in India:

  • Should end with the letters ‘LLP’ / ‘Limited Liability Partnership’ written in full
  • No resemblance with existing trademarks
  • Cannot use names like Bank, Stock Exchange, Corporation etc. without approvals from relevant regulators
  • Maximum two words allowed apart from LLP tag
  • Cannot use names of historic personalities without consent

Up to four name options can be applied for which remain valid for 3 months upon approval. The cost per approved LLP name is ₹1000.

Step 5) Prepare LLP Agreement

The LLP Agreement sets out the mutual rights and duties amongst partners inter se and is mandatory for registration. It is an important document equivalent to AoA and MoA of a company.

Some of the key clauses within an LLP agreement would cover:

  • Nature and scope of LLP’s activities
  • Contribution amounts of partners
  • Profit/loss sharing ratios
  • Roles and responsibilities of designated partners
  • Rights, duties and liabilities of partners
  • Rules for meetings
  • Accounting and auditing
  • Indemnity clauses
  • Dispute resolution process
  • Changes in partners
  • Dissolution terms

Plus additional clauses based on specific mutual understanding between partners.

While MCA has provided an indicative format for LLP Agreement, partners have the flexibility to draft their own document that aligns with their unique business needs as long as it covers the above aspect.

It is recommended that the LLP Agreement be drafted by a competent professional with legal knowledge to ensure compliance and effectiveness.

Step 6) File Incorporation Documents

Once name approval and LLP agreement is in place, the next step is to file for LLP registration with MCA by submitting filled Form 2 – Incorporation Document along with required attachments like:

a. Subscriber sheet with partner details and capital contribution
b. Consent letters from designated partners c. Declaration from professionals if applicable
d. NOC and address proof of registered office e. Details of LLP(s)/company(ies) as partners

Comprehensive information on the proposed LLP structure, designated & other partners, registered address, proposed activities etc. need to be provided in Form 2.

It has to be duly signed and stamped by the designated partners and submitted along with required attachments and registration fees to ROC. This can be done online through MCA portal.

Step 7 ) Obtain Certificate of Incorporation

Upon scrutinizing the incorporation documents (Form 2) and attachments, if ROC is satisfied with compliance to LLP rules it will register the LLP.

A 21 digit alphanumeric Certificate of Incorporation (COI) confirming the date of LLP formation gets generated. This can be downloaded from MCA portal once issued.

The COI certifies that the LLP now has an independent legal existence, a Permanent Account Number (PAN) will get allotted automatically post incorporation.

Step 8) Make an LLP Seal/Stamp

While not a compliance mandate, every LLP should create an official seal/stamp carrying its registered name, registered address, registration no. and date of incorporation.

This stamp needs to be affixed by designated partners on legal agreements, invoices, purchase orders etc.which adds to the credibility of business communications.

Rubber stamps can be easily made by any vendor. Embossing seals also serve the same purpose.

Step 9) Open a Current Bank Account

After LLP incorporation, a separate current bank account should be opened in the entity’s name with authorized signatories from amongst the designated partners.

This business account will be used for all financial transactions of the LLP going forward. PAN card details need to be submitted to the bank for opening the account.

Step 10) LLP PAN and TAN

While PAN automatically gets generated upon LLP incorporation, you need to separately apply for Tax Deduction Account Number (TAN) with Income Tax department.

The designated partners can apply online for TAN instantly with their DSC by providing certain essential details of the LLP.

TAN registration is mandatory for any business that deducts tax at source like professional fees, contractor payments etc. It is required to deposit TDS and file TDS returns every quarter.

Step 11) GST Registration

If your LLP provides any kind of goods or services in India and fall under the GST threshold you have to mandatorily obtain GST Identification Number (GSTIN).

It is a unique 15 digit state-wise registration code that helps trace all transactions of a business.

GST registration for a new LLP can be easily completed online via the GST portal with online application form GST REG-01.

This requires basic details of LLP, partners, activity, bank accounts, authorized signatories etc along with scanned documents. Registration certificate gets issued typically within 3 working days on email.

Step 12) Trademark Registration (Optional)

While not mandatory, an LLP can additionally secure Brand protection for its logos and names used in business by registering them under the Trademarks Act 1999 through Form TM-1.

The entire trademark filing process online just takes about 5-7 working days with certificate issuance in 2-3 months.

It prevents others from infringing or passing off their services in your brand’s name. Adds further authenticity.

Additional LLP Compliance Requirements

While the registration formalities get completed with the above 12 steps, here are some regular post-incorporation compliance requirements for LLPs:

  • Filing Annual Returns: Every LLP has to file an Annual Return in Form 11 to ROC within 60 days of financial year ending on 31st March. This gives details of all designated partners, changes if any and declaration of compliance signed by a designated partner. Continual non-filing can attract penal action.
  • Filing Annual Accounts: Within 30th October every year, LLPs have to file their audited or unaudited annual accounts and financial statements for each financial year before 30th October in Form 8 through online filing. Non-compliance attracts fine up to ₹5,000.
  • Intimate Changes in Partners: Any admission, retirement or cessation of existing partners needs to be intimated to ROC within 30 days in Form 3. Changes in designated partners require additional filings like DIR-12 etc.
  • Keeping Statutory Registers: Registers like Partners Contribution agreement register, Common Seal register, etc need to be maintained and kept updated at registered address of LLP.
  • Appointment as Statutory Auditor/Compliance Auditor: If turnover exceeds Rs 40 Lakhs or contribution value crosses Rs 25 Lakhs, it is mandatory for LLPs to appoint a Statutory Auditor and undergo compliance audit annually.

Breakup of LLP Registration Costs in India

Here is an indicative breakup of the costs involved in LLP registration and compliance in the first year for reference:

Expense DescriptionIndicative Cost
Government registration feesRs. 0
Digital signatures for 2 designated partnersRs 5,000
DIN for 2 designated partnersRs 0
LLP name approval feesRs 1,000
Stamp duty for LLP agreementVaries based on state
LLP agreement drafting chargesRs 3,000 – Rs 5,000
Filing fees for Form 2 and Form 3Rs 100 per document
Professional service feesRs 3,000 – Rs 5,000
Total Approximate CostRs 12,100 – Rs 16,100

So as you can see, the total approximate cost for registering an LLP ranges from ₹12,100 to ₹16,100. This includes government fees, professional charges, and documentation expenses.

The cost is significantly lower when compared to registering a private limited company, which could easily incur expenses of ₹15,000-₹20,000 or more. This competitive pricing makes LLP an attractive structure.

Some key things that help keep LLP registration costs low – zero government fees, no stamp duty or taxes, flexibility on capital contribution etc.

Role and Responsibilities of Designated Partners

As discussed earlier, designated partners (DPs) form an important position in the LLP structure. They are akin to directors in a private limited company.

Let’s understand the key roles and responsibilities designated partners have:

Compliance Management

  • Make sure to meet all regulatory compliances promptly, including the filing of annual returns, accounts, audit reports, etc.
  • Intimate ROC of any changes in partners within prescribed time limits
  • Maintain all statutory registers and documents
  • Represent LLP for any compliance related matter before tribunals

Administrative Duties

  • Make investments and take business decisions on behalf of LLP
  • Raise finances through loans as required for business operations
  • Open and operate bank accounts of LLP
  • Appoint internal auditors or secretarial staff if needed
  • Protect LLP’s intellectual property if any

Liabilities for Non-Compliance

  • Penal consequences under Limited Liability Partnership Act, 2008
  • Financial penalties upto ₹5 lakhs extendable to ₹5 crores

So in essence, designated partners act as the directing force behind an LLP much like board of directors and are accountable for regulatory requirements.

Conclusion

We have covered all major aspects in this detailed guide on LLP registration process, documentation, compliance formalities plus analysis of the advantages and limitations of an LLP structure.

LLPs provide operational flexibility for running a business, along with higher credibility and limited liability protection for partners. However, it’s important to note that they also entail a set of post-incorporation compliance responsibilities that partners must fulfill.

New partners should thus assess their bandwidth before opting for an LLP route.

That said, an LLP still remains one of the preferred legal structures in India for consultants, professionals and MSME business owners given its strengths.

We hope you found this article useful. Please feel free to reach out to our experts at Filingwala for any assistance on your LLP registration journey.

Happy Businesses Begin Here!

FAQs on LLP Registration

Q1. Can I convert my existing partnership firm or private company into an LLP?

Converting a partnership firm (whether registered or unregistered), private company, unlisted public company, or LLP into an LLP is entirely permissible. This can be achieved by filing the necessary forms with the Registrar of Companies (ROC).

Q2. Is prior approval from any regulator required for LLP registration?

Incorporating an LLP for business activities that are not sector-specific, such as banking, insurance, housing finance, etc., does not require prior approvals.

Q3. Can foreign nationals or NRIs be designated partners in an LLP?

Foreign nationals and NRIs can become designated partners in an LLP formed in India if they meet eligibility criteria, including minimum stay requirements in India, completion of verification formalities, and possession of a valid DIN.

Q4. Is having an LLP agreement mandatory?

Yes, an LLP Agreement that sets out the mutual rights and duties amongst partners is mandatory at the time of LLP registration. The format has flexibility but minimum content requirements must be met.

Q5. Can minor become partner in LLP? No, a minor cannot become a partner in an LLP . Only individuals who are of 18 years and above or competent to contract as per Indian Contract Act, 1872 can become LLP partners.

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