LLP or Limited Liability Partnership is achieving more popularity among the Indian market structures as a whole. This is a structure of business that offers the perks of both merits, allowing freedom of partnership as well as edging towards “Limited liability” like a Company. Now, lets understand as to why LLPs are most preferable option for businesses in India.

What is an LLP?

Limited Liability Partnership (LLP) is a unique form of business structure that aligns the benefits of a partnership firm and a Company. In LLP Firm, partners have limited liability same as the shareholders of a company and also enjoy the multiple benefits of partnership. This type of business arrangement gives the LLP separate legal structure to sue and be sued in its own name as apart from its partners. In LLP Firm, liability of the partners is unlimited as same like the shareholders of a Company.

This special type of partnership was first introduced in 2008 governed by Limited Liability Partnership Act 2008 design to fulfill and eliminate the complexity between “The Companies Act” and “The Partnership Act 1932”.

Features of LLP

An LLP is a separate legal entity like a company.
Minimum of two partners must be designated and atleast 2 partners are required to form LLP
There should be atleast one designated partner being resident of India
Liability of each partner is limited upto the amount of capital invested.
Incorporating an LLP is least expensive.
There is also least legal and regulatory requirement
There is no requirement of minimum capital to be introduced at the time of Incorporation.

Advantages of LLP

A separate legal entity - LLP is same as that of company in terms 0f legal structure means that the entity is different from its partners and can sue and to be sued in its name which allows stakeholders to rely on the business and boost confidence among the customers and suppliers.
The partners have limited liability - The liability of the owners of LLP is limited just like a company. They are to be held liable for the amount as contributed by them and cannot be personally held liable for any kind of losses incurred. At the time of insolvency of LLP, the assets relating to LLP will be used to satisfy the claim of Creditors.
Least compliance with less cost - The cost to incorporate an LLP is comparably low as compared to Public limited Company or Public limited Company. With reference to ROC Filing, there are only two statements which are required to be submitted namely “Annual Return” & “Statement of Account and Solvency”.
No Minimum Capital Contribution Required - At the time of formation of LLP, there is no requirement of minimum capital to be invested.

Disadvantages of LLP

High Penalty on non-compliance - Although, the compliances under LLP law are less but if in case there is a failure to meet the requirement within a specified period of time, then a hefty penalty is imposed by MCA. An LLP is required to submit “Annual Return” with the Ministry of Corporate Affairs (MCA) irrespective of even there is no business activity within a year.
Dissolution and Winding Up of LLP - There must be two designated partners at the time of formation of LLP. However, LLP can be dissolved if the number of partners in LLP is below 2 for six months and even if the LLP is insolvent and unable to pay its debt on a timely manner.
Challenges in raising funds - LLP have Partners as like owners of that of Company. It does not have shareholders which restrict angel investors and VCs to invest into an LLP as shareholders. In LLP, they must be partners to retain ownership and fully responsible for the roles and responsibilities attached to LLP.

LLP Structure in India

Atleast two partners are required and there is no maximum limit.
The LLP is governed by an agreement known as the LLP agreement, which specifies how each partner in the firm can share rights, responsibilities, and profits/losses.
There must be atleast two designated partners, who are in charge of ensuring that the LLP Act is adhered to
One designated partner out of two must be resident of India.
Limited Liability of the Partners to the extent of amount of capital contributed by each.
LLP continue to exist in its own name even if partners change due to retirement,death or resignation.

A Limited Liability Partnership (LLP) in India is a type of business structure that blend the flexibleness of partnership along with the benefit of limited liability in companies. An LLP can have at least two partners, and also there is no limitation for maximum number of partners. The LLP is governed by an agreement (LLP Agreement), which specifies methods for sharing of rights, responsibilities, and profits/losses. There should be atleast two designated partners, out of which one designated partner needs to be a resident of India, the others can be either be individuals or corporate entities. Partners are only be held liable upto the extent of capital invested into the LLP, and none of them are personally liable for the liabilities or risks attached to LLP. The LLP must have a registered office address, Bank Account in its own name, LLP also needs to maintain accounts as well as records etc. along with the filing of the LLP agreement.

Documents Required for LLP Formation in India

LLP Agreement: It is a compulsory document which includes details of the partners, rights and responsibilities, profit-sharing ratio, management structure of the LLP's business.
Document of Incorporation (Form 1): Form No.1 contains necessary information about the LLP, such as its name, registered address, names of the partners with their consent, and the firm's activities. It must be filed with the Registrar of Companies (ROC).
Name Approval Letter: The Registrar of Companies (ROC) must approve the LLP's name before incorporation. An approval letter is issued once the name is finalized.
Proof of Address of Registered Office: Proof of Address includes relevant legal documents like rent agreement, lease deed, electricity bill as a proof of registered address of the LLP.
Identity and Address Proof of Partners: It includes PAN card, Aadhaar card, voter ID, and passport, required to be served as a proof of identity as well as address proof.
Consent Letters from Partners: Agreements in written from partners for their consent to join the LLP.
Digital Signature of Selected Partner: Needed to submit various e-forms to the Ministry of Corporate Affairs in an electronic manner.
Authorization Letters: This allows specific individuals to sign document on the behalf of LLP.

Procedure for Registration of LLP in India

Step 1: Choosing LLP Name: Choosing LLP name as per the MCA database to confirm that the chosen or a similar name hasn’t acquired by any other.

Step 2: Drafting LLP Agreement: Drafting LLP agreement considering rules and regulation applied to and also it contains partners’ name, their contributions along with profit-sharing ratios.

Step 3: Digital Signature of the Proposed Partner: Partners need to procure a Class 2 digital signature to file all relevant forms electronically.

Step 4: Applying for Designated Partner Identification Number (DPIN): The designated partner must apply for the DPIN with ROC.

Step 5: Filing of Document of Incorporation (Form 1): Submitting Form 1 along with the LLP agreement letter for name availability to the ROC, and pay the requisite fees.

Step 6: Registration Certificate: After filing Form 1, the ROC will issue a Registration Certificate generally within 2 weeks along with PAN & TAN of the LLP

Step 7: Opening Bank Account: Opening a bank account in its own name for the transactions to be carried by LLP

Step 8: GST and Other Necessary Registrations: Apply for Registration in Goods and Services Tax (GST) and any other legal registrations if required for business activities to be carried out smoothly.

Step 9: File Post-Incorporation Changes: Form 8 (Partner/designation changes) and Form 11 (Changes in the LLP agreement). These forms should be filed with the ROC to report any changes post incorporation.

Incorporating an LLP in India is easy but it involves certain legal formalities and compliances as well. LLP is covered under the LLP Act of 2008, and executing the correct steps in a sequential manner for the registration of your LLP is important as it ensures legal formulation and allows you to lead off without inconvenience. The process of formation may seem lengthy at first due to various compliance requirements, but staying on the right path from the very beginning creates a strong groundwork for your LLP’s business activities. Seeking advice of a professional consultant can greatly assist for an effective registration process.

How SKMC can help you?

SKMC Global provides valuable and efficient services designed to standardized and simplify the LLP registration process, ensuring that our clients remain satisfied and can have a hassle-free experience all together.

Here's how SKMC Global can assist at each crucial step:

Expert Discussion: Our team of experts understands the objective of business and advises on the most suitable structure.
Document Drafting: Our team drafts the required documents along with the LLP Agreement meticulously so as to align the goals of the business with the documentation.
Filing of Application Submission:SKMC Global prepares and submit necessary documents with Registrar of Companies (RoC).
Obtaining the approval: Once the application is filed, SKMC Global team handles the task of ROC approval making the process hassle-free and seamless for the client.
Post incorporation Compliance: SKMC team ensures that the newly incorporated company adheres to the compliances required post-incorporation which allows the client to concentrate on the business's growth and operations