Limited Liability Partnership or LLP was introduced in India through the Limited Liability Partnership Act 2008. Although there were existing entities (Private Limited and Partnership), there was a need to have an entity which combines the advantages of a partnership firm and a company. Hence, a Limited Liability Partnership was introduced which offered easy maintenance and lesser compliance formalities.
Major advantages of an LLP registration are that each partner in an LLP is not responsible or liable for the acts of other partners. An LLP also enjoys a limited liability status wherein only the capital invested in the business is at risk and not the personal assets of the partners. LLP is incorporated as a separate legal entity and has a distinct entity separate from its partners.
LLP registration process is easy with fewer compliances as compared to other business entities. Statutory audits are also exempted in an LLP till the turnover reaches forty lakh Rupees or contribution increases to twenty five Lakh Rupees. The only downside of LLP registration is that it cannot issue shares and is not preferred for raising funds from investors.
The liability of the partners of a limited liability partnership is restricted to the capital contributed in the LLP, limiting the business risk to the capital contribution and safeguarding personal assets of the partners.
A limited liability partnership registration is initiated under the Limited liability Partnership Act 2008 and hence holds a separate legal entity which is distinct from its Partners.
An LLP involves lesser compliance burden vs other corporate entity forms. There is no statutory audit requirement up to a turnover of rupees forty lakh or until contribution increases beyond rupees twenty-five lakh.
A Limited Liability Partnership is not preferred by investors for funding when compared with a company. This is primarily due to fewer compliances in LLP resulting in lesser trust, no provision of shares and other Instruments, and lack of regulatory division of responsibilities between directors and shareholders.
DPIN, a unique Identification number for designated partners, and DSC, a Digital Signature Certificate having E-signatures are prepared.
Two proposed LLP names (along with their justification) are applied online via RUN LLP form on the MCA portal.
E-Form FiLLip is prepared and filed along with the required documents with the MCA for approval.
Once the E-Form FiLLip is approved, the Certificate of Incorporation is provided via E-mail.
Form FiLLiP is a new form for incorporation of Limited Liability Partnership registration with effect from the 2nd October 2018.
There is no minimum capital contribution prescribed for LLP under LLP Act 2008. LLP registration in Delhi or anywhere in India can be done with any amount.
LLP is a separate legal entity holding separate existence distinct from its partners, whereas the general partnership firm does not hold a separate existence distinct from its partners.
As the name suggests, LLP imposes limited liability over the partners at the time of winding up, whereas in a normal partnership firm partners are personally liable for debts of the business at the time of winding up and even their personal property may be used to settle the debts in case of the partnership firm.
LLP and General Partnership, although different share the same platform with respect to taxation and are taxed at a flat rate of 30%.
The LLP with the turnover is Rs. 40 lakh or more, or the total capital contribution is Rs. 25 lakh or more is mandatorily required to appoint the auditor. The auditor of LLP is appointed annually by the designated partner by passing a resolution, and no form is required to be filed.
The advantages of registering under the LLP are:
Limited Liability-The LLP registration imposes limited liability over the partners and hence, their personal property cannot be used to settle the debts.
Responsibility of activities- - Under LLP, the partners are responsible only for their own acts and cannot be held responsible for the act of other partners.
1. Both the LLP and Partnership are taxable at the flat rate of 30%.
2. The Partnership firm is covered under Presumptive taxation scheme under section 44AD and 44ADA of the Income-tax act whereas the LLP is not covered under the scheme which says that there is no need to maintain books of accounts or get accounts audited if turnover is below Rs. 2 crores in business or Rs. Fifty lakhs in case of a profession.
Any individual or corporate body can be a partner in an LLP. The designated partner needs to be a major above the age of 18 years. The Ministry of Corporate Affairs has no prohibition on the citizenship or residency of the partner. Thus, any foreign national or foreign corporate body can be a partner in Indian LLP with the condition that at least one designated partner should be a resident of India.
The Ministry of Corporate Affairs has set a prohibition on non-profit organizations to be converted to LLP. This is because the purpose of a limited liability partnership is to earn a profit. Thus, charitable institutions and organisations cannot have LLP registration.
According to the Limited Liability Partnership Act, 2008, it is not compulsory to have a physical or separate office for the business. During LLP registration, the designated partner’s home address can be registered. This address can be changed anytime afterwards with the Registrar of Companies (ROC).
The LLP registration does not require annual renewal. Once the LLP incorporation takes place, it is established for a lifetime unless the partners decide to wind it up. The limited liability partnership has to file returns every year and submit the reports to the Registrar of Companies.
Bhanu is a person to count upon, with his expertise in his domain and knowledge he brings on you can reach him with a problem any time. His appetite to listen and understand the issue makes him the man for the job. He is proactive, energetic and a resourceful guy. My best wishes to Bhanu and Startup seven for future endeavour.
Founder at Addensure Media LLP
Startup Seven is perfect to partner with in your startup or corporate journey. Seamless service and support provided by team is really helpful specially when you are trying to setup your venture. I would like recommend Startup Seven to every startup.
Founder Onmytap - NETWORK FOR PROFESSIONAL GROWTH
Bhanu is one of the most sincere and trustworthy person I have come across. He is extremely ethical and is completely customer focused. His hard work and dedication is commendable and with him handling the legal as well as taxation things are always in order and compliant. Keep up the good work Bhanu. Wishing you more and more success as you grow.
Co-founder, Executive - Brightsandz Clean Tech Pvt Ltd