Limited Liability Partnership Registration (LLP) in India
- Procedure for forming an LLP in India
- Procedure for forming a LLP in India
- Procedure for incorporating a LLP in India
- How to incorporate a LLP in India
- How to start a LLP in India
- LLP Registration in India
- Online LLP Registration in India
- How do I start a business in India
Overview
A Limited Liability Partnership is a corporate business vehicle that enables entrepreneurial initiative to operate in flexible and efficient manner by providing the benefits of limited liability and allowing its members to organize their internal structure as a partnership. LLP form of business is ideal for all classes of entrepreneurs whether it be traders, manufacturers or professionals. It is easy to incorporate and manage. LLP is more credible and preferable than a normal partnership firm.
Limited Liability Partnership has been introduced in India by way of Limited Liability Partnership Act, 2008. It exhibits elements of both partnership and corporation. In LLP, one partner is not responsible or liable for another partner’s misconduct or negligence unlike a traditional partnership in which each partner has joint and several liability.
Advantages of a Private Limited Company
1. No requirement of minimum contribution
There is no minimum capital requirement in LLP. An LLP can be formed with the least possible capital. Moreover, the contribution of a partner can consist of tangible, movable or immovable or intangible property or other benefits to the LLP.
2. No limit on owners of the business
An LLP requires a minimum of 2 partners while there is no limit on the maximum number of partners. This is in contrast to a private limited company wherein there is a restriction of not having more than 200 members.
3. Lower registration cost
All companies, whether private or public, irrespective of their share capital, are required to get their accounts audited. But in case of LLP, there is no such mandatory requirement. This is perceived to be a significant compliance benefit. A Limited Liability Partnership is required to get the tax audit done only in the case that:
1. The contributions of the LLP exceeds Rs. 25 Lakhs, or
2. The annual turnover of the LLP exceeds Rs. 40 Lakhs
4. No requirement of compulsory Audit
The cost of registering LLP is low as compared to the cost of incorporating a private limited or a public limited company.
5. Taxation Aspect on LLP
For income tax purpose, LLP is treated on a par with partnership firms. Thus, LLP is liable for payment of income tax and share of its partners in LLP is not liable to tax. Thus no dividend distribution tax is payable. Provision of ‘deemed dividend’ under income tax law, is not applicable to LLP. Section 40(b): Interest to partners, any payment of salary, bonus, commission or remuneration allowed as deduction.
6. Dividend Distribution Tax (DDT) not applicable
In the case of a company, if the owners to withdraw profits from the company, additional tax liability in the form of DDT @ 15% (plus surcharge & education cess) is payable by the company. However, no such tax is payable in the case of LLP and profits of an LLP can be easily withdrawn by the partners.
Disadvantages of a Private Limited Company
1. Penalty for Non-Compliance
Even if an LLP does not have any activity, it is required to file an income tax return and MCA annual return each year. In case an LLP fails to file Form 8 or Form 11 (LLP Annual Filing), a penalty of Rs.100 per day, per form is applicable. There is no cap on the penalty and it could run into lakhs if an LLP has not filed its annual return for a few years.
In case of a proprietorship or partnership firm, there is no requirement for filing an annual return. Hence, only penalty under the Income Tax Act would be applicable.
2. Inability to Have Equity Investment
An LLP does not have the concept of equity or shareholding like a company. Hence, angel investors, HNIs, venture capital and private equity funds cannot invest in an LLP as shareholders. Thus, most LLPs would have to rely on funding from promoters and debt funding.
3. Higher Income Tax Rate
The income tax rate for a company with a turnover of up to Rs.250 crores is 25%. (Further reduced in 2019 for new companies involved in manufacturing). However, LLPs are taxed at a 30% rate irrespective of the turnover.
LLP Registration Process
It usually takes 15-20 days to register a LLP subject to ROC processing time. Pioneer One makes LLP registration easy for you.
Documents required for LLP Registration
For Partners / Promoters
- Copy of PAN
- Copy of Address proof – Aadhaar Card / Driving License / Passport / Voter ID
- One Photograph
- Copy of Bank Statement / Electricity Bill / Mobile Bill / Landline Telephone Bill
For LLP Address
- Proof of Registered Address – Sale Deed / Rental Agreement
- Copy of Utility bill – (EB, Telephone Bill, Property Tax Receipt, Water Tax Bill) for proposed company address not older than 2 months
- NOC from owner / occupier of the property to use the premises as registered office
Choosing a Name for your LLP
Certain important points should be kept in mind when choosing a name for LLP registration:
- Make sure that the LLP name is unique and does not resemble the name of any other existing Company or LLP
- It is easier to obtain a name if it depicts the objects of your LLP
- The name should not include any word which is a registered trademark or has been applied for trademark registration
Incorporation of Private Company: Overview
- Obtain DSC
- Apply for DIN
- Name Approval
- Incorporation of LLP
- File LLP Agreement
Inclusions
- Class 2 Digital Signatures – Two Nos
- Director Identification Number – Two Nos
- Reserve Unique Name (RUN) Approval – One Nos
- Incorporation Fee
- Stamp Duty
- Drafting of LLP Agreement
- Filing of Form 3 (LLP Agreement)
- Drafting of other relevant documents for the purpose of incorporation
- Issue of Certificate of Incorporation
- Income Tax – PAN & TAN
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