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LLP Registration Procedure in India
Company

LLP Registration Procedure in India

A Limited Liability Partnership (LLP) is a type of business structure that is different from the traditional corporation. As a result, it not only offers the benefits of limited liability, but it also gives its members the freedom to organise their internal activities in the manner of a partnership based on an agreement reached by consensus.

You may also read How to Convert Partnership Firm to LLP ? Process and Benefits

The Limited Liability Partnership Act, 2008 governs the formation and operation of LLPs in India. In order to form an LLP, a minimum of two partners must be present. An LLP, on the other hand, has no upper restriction on the number of partners that can be formed.

There should be a minimum of two designated partners among the partners, both of whom should be people, with at least one of them being a resident of India. The LLP agreement governs the rights and responsibilities of designated partners and their designated partners. They are directly responsible for ensuring that the provisions of the Limited Liability Partnership Act, 2008, as well as any provisions stipulated in the LLP agreement, are adhered to.

Who are Designated Partners?

Every limited liability partnership (LLP) must have at least two designated partners. At least one of the designated partners needs to be a  resident of India (resident of India is a person who stays in India for a minimum of 182 days in an year). A body corporate may nominate an individual to act as a designated partner on behalf of the body corporate. In some cases, the incorporation deed may indicate which individuals will serve as designated partners. In line with the LLP Agreement, any partner may be designated as a partner or may be designated as a partner who is no longer designated. Every designated partner is required to have a DPIN. Limited Liability Partnership Rules, 2009 were changed by the Ministry of Commerce and Industry (MCA) on July 5, 2011 (with effect from July 9, 2011). Instead of applying for a Designated Partner Identification Number (DPIN), each partner who will be nominated as a Designated Partner will now need to apply for a DIN rather than a DPIN. In the case of individuals who hold both a DPIN and a DIN, their DPIN will be cancelled. In order to receive a DPIN, an individual must submit an application in Form DIN-1 in accordance with the Companies (Director Identification Number) Rules, 2006. LLP Forms 7 and 10 are no longer valid as a result of this decision. An individual must offer prior consent before becoming a designated partner, and the LLP must file consent in Form 4 with the Registrar before becoming a designated partner. If there is a change in the information included in the formerly used Form 7 or DIN-1 for the purpose of allocating a DPIN, the modifications must be reported in Form DIN-4 within 30 days of the change. A limited liability partnership (LLP) may select a designated partner within 30 days of a vacancy occurring for any cause. If there is no designated partner, or if there is only one designated partner at any point in time, each partner is deemed to be a designated partner under the circumstances. Designated partners are responsible for performing all acts, matters, and things that are needed to be fulfilled in order to comply with the conditions of the Limited Liability Partnership Act (LLP Act). They are accountable for any and all penalties levied against the LLP.

Also read Advantages of LLP Registration

An LLP can have as many partners as it wants. A body corporate can contain an Indian company, a company formed outside of India, an LLP registered in India, and an LLP incorporated outside of India. A body corporate, on the other hand, cannot be a designated partner. Every limited liability partnership (LLP) must have at least two authorised partners, with at least one of them being a resident of India. As long as all of the partners in an LLP are body corporates, at least two individual nominees of those body corporates should serve as designated partners.

Registration of LLP:

Step 1: Obtain a Certificate of Digital Signature Authority (DSC)

One must first get the digital signatures of the selected members of the prospective limited liability partnership (LLP) before proceeding with the registration system.

Costs associated with earning a DSC vary from one certifying agency to another. One should receive DSC in the Class 3 category.

Step 2: DIN Application 

Next, one must apply for a Director Identification Number (DIN) (DIN)

One must apply for the DINs of all of the designated partners, or those who want to become designated partners, of the proposed limited liability partnership. Form DIR-3 must be used to submit an application for the assignment of a DIN number.

One must include a softcopy of your identification documents (often one’s Aadhaar and PAN) to the application form.

Step 3: Obtaining Approval for the Name

In order to reserve the name of the proposed LLP, a form LLP-RUN (Limited Liability Partnership-Reserve Unique Name) must be filed with the Central Registration Centre, which will be handled by the Central Registration Centre under the Non-STP procedure. However, it is recommended that you use the free name search facility available on the MCA portal before entering the name in the form.

The form RUN-LLP must be accompanied by the fees listed in Annexure 'A, which may be allowed or denied by the registrar depending on the circumstances. A re-submission of the form will be permitted within 15 days of the initial submission in order to correct any errors. There is a provision in the agreement that allows for the provision of two recommended names for the LLP.

Step 4: Establishing a Limited Liability Partnership (LLP).

The FiLLiP (Form for Incorporation of Limited Liability Partnership) is the form that must be completed and filed with the Registrar of the state in where the LLP's registered office is located in order for the partnership to be formed. The form will be a single piece of software.

Fees in accordance with Annexure 'A' must be paid. If the individual who is to be nominated as a designated partner does not already have a DPIN or DIN, this form allows them to apply for one through the Department of Homeland Security.

One or two individuals will be permitted to submit an application for an allocation of land at any given time.A reservation request can also be submitted using FiLLiP, if that is preferred. As soon as the approved and reserved name of the LLP is established, this approved and reserved name will be used as the proposed name of the limited liability partnership. Formalize the Limited Liability Partnership (LLP) agreement in Step 5.

The LLP agreement controls the reciprocal rights and responsibilities of the partners, as well as the relationship between the LLP and its partners. The LLP Agreement must be printed on Stamp Paper in order to be valid. The stamp duty varies from state to state.

Also read Limited Liability Partnership (LLP). 

Which Is Better For A Small Sized Company: LLP Or Partnership?
Company

Which Is Better For A Small Sized Company: LLP Or Partnership?

Both Limited Liability Partnerships and Partnerships are two of the various ways of incorporating a business provided under the Indian Law. LLPs are governed under the Limited Liability Partnership Act, 2008 and Partnerships are governed under the Indian Partnership Act, 1932. Although new in introduction, LLPs have made their mark and have successfully replaced the prominence of partnerships to an extent. To conclude which of the two is better for a small-sized company, first of all, it is required to have a comparison between the two.

You may also like to read MSME Registration in India

About the entities

Partnerships- Partnerships are registered under the Indian Partnership Act, 1932. The main aspect of a partnership is the unlimited personal liability of the partners for the partnership liabilities. This essentially means that Partnerships and partners don’t have independent legal presence. Partnerships are not perpetual in existence.

LLPs are registered and governed under the Limited Liability Partnership Act, 2008. The most important facet of LLPs is that Partners of an LLP are not personally liable for LLP liabilities, the liability of the partner is according to his capital contribution in it. Meaning whereby that LLPs and its partners are separate legal entities. LLPs are perpetual in existence unless dissolved by the promoters.Partner Requirement

Partnership- An Indian Citizen residing in India can be a partner of a Partnership(including minors).The minimum partner threshold is 2 and maximum is 20. The management of the partnership is defined in the partnership deed where one or more partners can be designated as managers.

LLP- An Indian Citizen residing in India can be a partner of a LLP(excluding minors). Foreign Direct Investment with prior RBI approval is allowed. The minimum threshold of partners is 2 and maximum threshold is unlimited. The managerial aspects of a LLP are governed by an LLP agreement and designated partner/s for the management.

Transferability and Convertibility

Partnership- To transfer the share a partner has to obtain the consent of all the partners.  Also, to convert a partnership into a Pvt. Ltd. Company or LLP is a lengthy and cumbersome process.

LLP- The share in an LLP can be transferred easily, but it is not necessary that the transferee automatically attains a partner's status. The conversion process of LLP into a Pvt. Ltd. company is very easy.

Also, read Limited Liability Partnership v. Private Limited Company

Taxation

Partnership- The tax slab on profits of a Partnership is 30% + educational cess but there is no annual return filing requirement for a partnership firm.

LLP- The tax slab on profits of an LLP is 30% + educational cess. An LLP has to file annual return with the ministry of corporate affairs.

Registration procedure

Partnerships

Most important in the registration of partnerships is that registration is not compulsory but voluntary as under the Partnership Act, 1932. So, it can be registered at the time of its incorporation or a later stage. But it is highly recommended that the partners get the firm registered. The procedure is as follows-

  1. Partnerships are registered with the registrar of firms
  2. Submission of application to the registrar of firms
  3. Name Selection
  4. Drafting of Partnership Deed
  5. Obtaining the certificate of Registration

Processing Time- 10 days (Approx.)

LLP

The process of registration of LLPs is very similar to that of a Pvt. Ltd. Company and is given in the steps below-

1. Obtaining Digital Signature Certificate for the Proposed Partners

2. Obtaining Director Identification Number for the proposed Partners

3. Name Approval from Ministry of Corporate Affairs(MCA)

4. Filing Incorporation

5. Filing Limited Liability Partnership Agreement (within 30 days from the date of

incorporation of the LLP)

Processing Time- 20 days (Approx.)

Which is better for a small sized business?

The talk about something being ‘better’ totally depends on personal requirements of business owners. For example, there are far less compliances in partnerships as compared to the LLP, there is no requirement of filing annual returns in partnerships.

If minors are also involved in the activity, certainly partnership will be better. In traditional partnerships, minors can also be made the partners, which is not the case in LLPs.

On the other hand, LLP is a mix of a partnership and company, it saves partners form unlimited liability as it has its legal presence which makes it easy for the partners as they can hold property and take loans and enter into contracts for the business in the name of the business only, LLP certainly has less legal compliances but higher penalties in case they are missed.

If seen generally, the concept of LLPs has rapidly gained traction and more and more people are incorporating their businesses as LLPs. It is cheap and easy in its formation and management due to which it has been the popular choice of the small business owners. In Traditional partnerships, a Partnership agreement is not required and partners can work on consensus which can lead to disputes proving it to be a big detriment to the business owners. So, an LLP is good for a small business because it provides limited liability like a private company and flexibility like a partnership that gives synergized output to the business.

Also read Limited Liability Partnership (LLP). 

What is the procedure for conversion of partnership to LLP?
Company

What is the procedure for conversion of partnership to LLP?

Initially, people prefer to establish a partnership firm because it is simple to set up and requires the least regulation and expense. They then seek to convert their current partnership enterprises into Limited Liability Partnerships (LLP) to legitimize the organization when the company grows or if a disagreement emerges between the partners. For various causes, including those already indicated, the same tendency has recently accelerated significantly.

Also read LLP Registration Procedure in India

  1. There is no restriction on the number of partners.
  2. When comparing a Limited Liability Partnership to a partnership firm, the liabilities of partners is restricted to the extent of capital invested. This is the major advantage of a Limited Liability Partnership over a partnership firm.
  3. The limited liability partnership (LLP) is a legal entity with a more defined company structure and continuous succession.
  4. Limited liability partnerships (LLPs) have greater creditworthiness than partnerships because their accounts and financial records are available for public examination on the MCA site.
  5. It provides complete autonomy in the management of the company.
  6. Foreign Direct Investment (FDI) in limited liability partnerships (LLPs) is relatively easy to get, although this is not the case in partnerships.
  7. Limited liability partnerships (LLPs) can use the different Start-up India Schemes sponsored by the state and profit from taxation rebates, and other incentives.
  8. Because the Rule of Agency concept does not apply to LLPs, the partners are not accountable for the actions of their fellow partners, making LLPs a more secure option for conducting business operations.

REGULATORY FRAMEWORK FOR CONVERSION OF FIRM INTO LLP:-

  1. Section 55 of the LLP Act, 2008 read with Rule 38 of LLP Rules, 2009
  2. Schedule 2 of LLP Act, 2008

ELIGIBILITY FOR CONVERSION: – An existing partnership firm may apply to transform into an LLP provided all of the partners of the LLP into which the partnership is to be transformed are also partners of the existing partnership firm.

Also read Advantages of LLP Registration

OTHER IMPORTANT POINTS TO KEEP IN MIND BEFORE COMPLETING THE APPLICATION INCLUDE:

  1. To convert a partnership, all partners must agree in writing to the conversion.
  2. In addition, each partner should contribute to the LLP in the same ratio as their capital accounts were recorded in the books of the company.
  3. The partnership firm is required to file Income Tax Returns that are up to date;
  4. There must be at least one designated partner who is a resident of India.
  5. Before submitting a conversion application, it is necessary to gain the permission of all secured creditors.
  6. It is necessary to get the Digital Signature of at least one Designated Partners to complete the transaction.
  7. If previous approval or NOC is required from the relevant department, the firm shall obtain it.

PROCEDURE FOR TRANSFORMING A PARTNERSHIP FIRM INTO A LIMITED LIABILITY COMPANY

STEP 1: – Reservation of Name Complete the web-based RUN LLP form to reserve the name of the prospective limited liability partnership. As an additional element to include, the terms LLP  should be included after the name of the partnership firm. The approved name is only valid for 90 days from its approval unless otherwise specified.

STEP 2:- Filing of the Articles of Incorporation, i.e. eForm FILLIP After the proposed LLP's name has been approved, the eForm FILLIP must be filed with the following attachments, in addition to the requisite documents: -

  • A utility bill from the registered office (not older than two months), as well as the NOC,
  • Signed Subscribers Sheet is required.
  • Consent of all the partners is required.
  • All subscribers must provide proof of their identity and address.
  • A copy of the letter of intent from an existing partnership Information about the LLP/company in which the partner/DP is a Director/Partner

STEP-3:- Submitting eForm 17. The partners must apply conversion in eForm 17 along with the following attachments: –

  • Statement of Assets and Liabilities of the firm duly certified by a CA in Practice;
  •  List of Creditors with their consent for conversion;
  • Consent of all partners for conversion;
  • Approval from any other body/authority as may be required;
  • Statement of Partners in the format as mentioned in Schedule II;
  • Copy of Acknowledgement of Latest Income Tax Refund;
  • Copy of Acknowledgement

STEP-4: Approval/Sent for Re-submission of the document in case of rejection by the Triunal. Upon approval, the Registrar will issue a Certificate of Incorporation to the business entity concerned. In the event of a denial by the Registrar, an appeal may be filed with the Tribunal, which has jurisdiction over the matter.

STEP-5: The Registrar of Firms receives notice of completing Step 4. The LLP must notify the registrar of firms of the conversion within 15 (fifteen) days of the date of conversion by filing Form-14 with the registrar of firms and attaching the necessary documents:

  • A copy of the LLP's Certificate of Incorporation;
  •  A copy of the LLP's Incorporation paperwork has been submitted.

It should be emphasised that Form 14 is a physical form that must be submitted to the Registrar of Firms by completing it physically, signing it, and mailing it to the address listed on the form.

STEP-6:- Submittal of Form LLP-3 (Limited Liability Partnership Agreement): Final step is to file eForm LLP 3 with the Registrar within 30 days of the date of conversion of the firm into a limited liability partnership, i.e., the date on which the certificate of incorporation is issued with the LLP Agreement attached. Once the LLP is formed following the conversion of the Partnership Firm, the Partnership Firm will be regarded to have been dissolved by the courts. The firm's properties, assets, interests, rights, privileges, responsibilities, and duties are all transferred to the LLP upon the conversion of the partnership into a limited liability partnership (LLP). Or, to put it another way, the LLP assumes full responsibility for the entire firm's project.

Also read Limited Liability Partnership (LLP). 

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