Limited Liability Partnership
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About Limited Liability Partnership
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 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.
Advantages Of LLP
Separate legal entity
An LLP has a separate legal entity, just like companies. The LLP is distinct from its partners. An LLP can sue and be sued in its own name. The contracts are signed in the name of the LLP, which helps to gain the trust of various stakeholders and gives the customers and suppliers a sense of confidence in the business.
Limited liability of the partners
The partners of the LLP have limited liability. The liability of the partners is limited to the contributions made by them. This means that they are liable to pay only the amount of contributions made by them and are not personally liable for any loss in the business. If an LLP becomes insolvent at the time of winding up, only the LLP assets are liable for clearing its debts. The partners have no personal liabilities, and thus they are free to operate as credible businessmen.
Low cost and less compliance
The cost of forming an LLP is low compared to the cost of incorporating a public or private limited company. The compliances to be followed by the LLP is also low. The LLP needs to file only two statements annually, i.e. Annual Return and a Statement of Accounts and Solvency.
No requirement of minimum capital contribution
The LLP can be formed without any minimum capital. There is no requirement of having a minimum paid-up capital before going for incorporation. It can be formed with any amount of capital contributed by the partners.
Disadvantages Of LLP
Penalty on non-compliance
The compliance that is to be followed by LLP is minimal. But, if these compliances are not completed on time, then the LLP will have to pay a heavy penalty. Even if the LLP does not have any activity in the year, it is required to file returns with the Ministry of Corporate Affairs (MCA) annually. If it fails to file the returns, then a heavy penalty will be imposed on the LLP.
Winding up and dissolution of LLP
A minimum of two partners is required to form an LLP. If the minimum number of partners is below two for six months, then the LLP will be dissolved. It may be dissolved if the LLP is unable to pay its debts.
Difficulty to raise capital
The LLP does not have the concept of equity or shareholders like a company. Angel investors and venture capitalists cannot invest in the LLP as shareholders. This is because the shareholders must be partners in the LLP and have to take up all the responsibilities of a partner. Thus, angel investors and venture capitalists prefer to invest in a company rather than an LLP making it difficult for the LLPs to raise capital.
Documents Required For LLP Registration
- PAN Card
- Passport (Foreign Nationals Only)
- Voters Identity Card
- Ration Card
- Driving License
- Electricity Bill
- Telephone Bill
- Aadhaar Card
- Bank Statement
- Passport Size Photo
- Recent Utility Bill
- Business Place
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Limited Liability Partnership FAQ's
A Limited Liability Partnership must have a minimum of two Partners and an LLP can have any number of Partners.
The designated Partner must be a natural person who is above 18 years of age. LLP Act 2018 allows a foreign national including Foreign Companies to incorporate an LLP in India, provided at least one designated partner is Indian.
An LLP can be started with any amount of money there is no such minimum requirement. A partner may contribute both tangible and intangible property.
An existing partnership firm or a Company that is unlisted can be converted into an LLP. This conversion into an LLP brings in many benefits.
For the Partners 1. PAN or Passport 2. Any Identity proof 3. Bank statements Registered office proof 4. NOC from the landlord to use the premises of the registered office 5. Any utility bills of the premises which are not less than two months.
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