Advantages and Process of Limited Liability Partnership (LLP) Registration in India

Advantages and Process of Limited Liability Partnership (LLP) Registration in India

Mar 22, 2024

15 Mins

Limited Liability Partnership (LLP) registration has emerged as a popular choice for entrepreneurs in India. Combining the advantages of a partnership firm and a company, an LLP is established by a minimum of two partners who enter into an LLP agreement. The unique feature of an LLP is that partners have limited liability and it enjoys perpetual succession, similar to a company.

Introduced in India in 2008, LLPs are regulated by the Limited Liability Partnership Act. While a minimum of two partners are required to incorporate an LLP, there is no maximum limit on the number of partners.

Among the partners, there must be a minimum of two designated partners, who should be natural persons. At least one designated partner should be a resident of India. Their rights and duties are governed by the LLP agreement and they are directly responsible for ensuring compliance with the LLP Act and the provisions mentioned in the agreement.

LLPs have several advantageous features. Firstly, they have a separate legal entity, which means they can sue and be sued in their own name. This gives stakeholders confidence and builds trust with customers and suppliers. Secondly, partners enjoy limited liability, as they are only liable to pay the amount they have contributed to the LLP. Their personal assets are protected and they can operate as credible businessmen. Additionally, LLPs offer low formation costs, fewer compliance requirements, and no minimum capital contribution.

However, there are also some drawbacks to consider. If an LLP fails to comply with the minimal requirements, it may face heavy penalties. Furthermore, if the number of partners falls below two for a continuous period of six months, the LLP may be dissolved. Lastly, LLPs may face difficulty raising capital as they do not have the option to attract angel investors or venture capitalists like companies.

To register an LLP in India, there are several steps to follow. Firstly, the designated partners must obtain a digital signature certificate (DSC) from government-certified agencies. Then, they should apply for a designated partner identification number (DPIN) through Form DIR-3. Next, the partners need to reserve a unique name for the LLP using the RUN LLP form. Once the name is approved, the incorporation of the LLP can be done using the FiLLiP form. Finally, the LLP agreement must be filed in Form 3 within 30 days of incorporation.

During the registration process, certain documents are required. Partners need to provide their PAN cards, ID proofs, residence proofs, and photographs. If foreign nationals or NRIs are partners, their passports and proof of address are necessary. Proof of the registered office address also needs to be submitted, along with a digital signature certificate for the designated partner.

While LLP registration involves certain fees, the cost is generally lower compared to incorporating a public or private limited company. The exact pricing may vary, so it's recommended to consult with experts for complete details.

The overall time required for LLP registration, from obtaining the DSC to filing the necessary forms, is approximately 10 days, subject to departmental approval.

In conclusion, LLP registration offers entrepreneurs in India the flexibility and advantages of both a partnership firm and a company. With limited liability, separate legal entity status, and fewer compliance requirements, LLPs prove to be an attractive option for aspiring business owners.

Limited Liability Partnership (LLP) registration has emerged as a popular choice for entrepreneurs in India. Combining the advantages of a partnership firm and a company, an LLP is established by a minimum of two partners who enter into an LLP agreement. The unique feature of an LLP is that partners have limited liability and it enjoys perpetual succession, similar to a company.

Introduced in India in 2008, LLPs are regulated by the Limited Liability Partnership Act. While a minimum of two partners are required to incorporate an LLP, there is no maximum limit on the number of partners.

Among the partners, there must be a minimum of two designated partners, who should be natural persons. At least one designated partner should be a resident of India. Their rights and duties are governed by the LLP agreement and they are directly responsible for ensuring compliance with the LLP Act and the provisions mentioned in the agreement.

LLPs have several advantageous features. Firstly, they have a separate legal entity, which means they can sue and be sued in their own name. This gives stakeholders confidence and builds trust with customers and suppliers. Secondly, partners enjoy limited liability, as they are only liable to pay the amount they have contributed to the LLP. Their personal assets are protected and they can operate as credible businessmen. Additionally, LLPs offer low formation costs, fewer compliance requirements, and no minimum capital contribution.

However, there are also some drawbacks to consider. If an LLP fails to comply with the minimal requirements, it may face heavy penalties. Furthermore, if the number of partners falls below two for a continuous period of six months, the LLP may be dissolved. Lastly, LLPs may face difficulty raising capital as they do not have the option to attract angel investors or venture capitalists like companies.

To register an LLP in India, there are several steps to follow. Firstly, the designated partners must obtain a digital signature certificate (DSC) from government-certified agencies. Then, they should apply for a designated partner identification number (DPIN) through Form DIR-3. Next, the partners need to reserve a unique name for the LLP using the RUN LLP form. Once the name is approved, the incorporation of the LLP can be done using the FiLLiP form. Finally, the LLP agreement must be filed in Form 3 within 30 days of incorporation.

During the registration process, certain documents are required. Partners need to provide their PAN cards, ID proofs, residence proofs, and photographs. If foreign nationals or NRIs are partners, their passports and proof of address are necessary. Proof of the registered office address also needs to be submitted, along with a digital signature certificate for the designated partner.

While LLP registration involves certain fees, the cost is generally lower compared to incorporating a public or private limited company. The exact pricing may vary, so it's recommended to consult with experts for complete details.

The overall time required for LLP registration, from obtaining the DSC to filing the necessary forms, is approximately 10 days, subject to departmental approval.

In conclusion, LLP registration offers entrepreneurs in India the flexibility and advantages of both a partnership firm and a company. With limited liability, separate legal entity status, and fewer compliance requirements, LLPs prove to be an attractive option for aspiring business owners.

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