The Limited Liability Partnership (LLP) structure has gained significant popularity among entrepreneurs in India due to its unique combination of the benefits of both partnership firms and companies. As implied by the name, an LLP is a partnership firm established by at least two partners who enter into an LLP agreement. Unlike traditional partnerships, the liability of partners in an LLP is limited, and the LLP enjoys perpetual succession similar to a company.
Introduced in India in 2008 through the Limited Liability Partnership Act, 2008, LLPs are now a well-regulated and preferred form of business organization. To form an LLP, a minimum of two partners is required, although there is no maximum limit on the number of partners that an LLP can have.
Among these partners, there must be at least two designated partners who are natural persons, with at least one resident in India. These designated partners bear specific responsibilities as outlined in the LLP agreement and are accountable for ensuring compliance with the LLP Act, 2008, as well as the terms of the agreement. We provide the best LLP registration services.
Key Features of an LLP
- Separate Legal Entity: An LLP is a distinct legal entity, separate from its partners, similar to a company.
- Minimum and Maximum Partners: At least two partners are needed to form an LLP, with no upper limit on the number of partners.
- Designated Partners: A minimum of two designated partners is required, with at least one residing in India.
- Limited Liability: The liability of each partner is limited to their contribution to the LLP.
- Low Cost and Compliance: The formation and maintenance of an LLP involve lower costs and fewer regulatory requirements compared to other business structures.
- No Minimum Capital Requirement: An LLP can be formed without any minimum capital contribution.
Advantages of an LLP
- Distinct Legal Identity: An LLP has its own legal identity, separate from its partners, allowing it to enter into contracts and sue or be sued in its own name. This feature enhances the credibility of the business in the eyes of customers and stakeholders.
- Limited Partner Liability: Partners in an LLP are only liable up to the amount they have contributed, safeguarding their personal assets from business debts.
- Cost-Effective and Less Burdensome: Establishing an LLP is more affordable than forming a public or private limited company, and the ongoing compliance requirements are minimal, limited to filing an Annual Return and a Statement of Accounts and Solvency.
- Flexible Capital Structure: There is no need for a minimum paid-up capital, allowing partners to contribute any amount of capital when forming the LLP.
Disadvantages of an LLP
- Penalties for Non-Compliance: Although the compliance requirements are minimal, failing to meet them can result in hefty penalties. LLPs must file returns with the Ministry of Corporate Affairs (MCA) annually, even if there has been no activity during the year.
- Dissolution Risks: An LLP requires a minimum of two partners to remain in operation. If the number of partners drops below two for more than six months, the LLP may be dissolved. Additionally, if the LLP is unable to pay its debts, it could face dissolution.
- Challenges in Raising Capital: Unlike companies, LLPs cannot issue equity shares. This makes it challenging to attract angel investors or venture capitalists, who typically prefer investing in companies where they can take on a shareholder role without the responsibilities of a partner.
LLP Registration Process
- Obtain Digital Signature Certificate (DSC): The first step is for the designated partners to obtain a Digital Signature Certificate (DSC), which is necessary for digitally signing all documents filed online during the LLP registration process. This certificate must be acquired from a government-recognized certifying agency.
- Apply for Designated Partner Identification Number (DPIN): Next, apply for a DPIN for all designated partners through Form DIR-3. This form must be signed by a practicing Company Secretary, Chartered Accountant, or Cost Accountant and accompanied by scanned copies of supporting documents, such as Aadhaar and PAN cards.
- Name Approval: File the RUN-LLP (Reserve Unique Name-Limited Liability Partnership) form to reserve the name of the proposed LLP. It’s advisable to check for similar existing names using the MCA’s free name search tool to avoid rejection. The chosen name must not resemble any existing business entity or trademark.
- Incorporation of LLP: The FiLLiP (Form for incorporation of Limited Liability Partnership) is used for registering the LLP with the Registrar. This integrated form can also be used to apply for a DPIN if required. Fees are applicable as per Annexure ‘A’. The approved name from the name reservation step will be used during this process.
- File LLP Agreement: The LLP agreement, which outlines the mutual rights and duties of the partners, must be filed in Form 3 on the MCA portal within 30 days of incorporation. The agreement needs to be printed on stamp paper, with the value of the stamp paper varying by state.
Documents Required for LLP Registration
For Partners:
- PAN Card/ID Proof: All partners must provide their PAN cards as primary ID proof.
- Residence Proof: Acceptable documents include voter ID, passport, driver’s license, or utility bills not older than 2 months.
- Photograph: A passport-sized photograph of each partner.
- Passport (for Foreign Nationals/NRIs): Foreign nationals and NRIs must provide a notarized or apostilled passport. They must also submit proof of address, such as a driver’s license or bank statement. If documents are not in English, a notarized translation is required.
For LLP:
- Proof of Registered Office Address: Submit proof of the registered office address either during registration or within 30 days. If the office is rented, a rent agreement and a no-objection certificate from the landlord are required. Additionally, a utility bill not older than 2 months should be submitted as proof of address.
- Digital Signature Certificate (DSC): One designated partner must obtain a DSC for digitally signing documents.
LLP Forms Overview
| Form Name | Purpose |
| FiLLiP | Incorporation of LLP |
| RUN LLP | Reserving a name for LLP |
| Form 3 | LLP Agreement |
| Form 8 | Statement of Account and Solvency |
| Form 11 | Annual Return of LLP |
| Form 24 | Application for striking off LLP name |
Checklist for LLP Registration
- Minimum of two partners.
- DSC for all designated partners.
- DPIN for all designated partners.
- Unique name for the LLP.
- Capital contribution by the partners.
- LLP Agreement.
- Proof of the registered office.
This guide provides a comprehensive overview of the LLP registration process, highlighting its key features, advantages, and challenges.
