Setting up a business can be a thrilling adventure, and one of your biggest decisions will be choosing the appropriate business structure; however, there are numerous options available. Limited Liability Partnerships Registration (LLPs) have recently emerged as an attractive choice within India, particularly among new ventures and small businesses, offering entrepreneurs the best elements of both a traditional partnership as well as the protection that comes with forming an LLC. Therefore, it is a well-rounded and balanced option.
What is a Limited Liability Partnership?
LLP is a jointly owned business and a type of partnership whereby business owners can incorporate together without being held liable for their partners’ debts, meaning:
The owner(s) of the LLP would not be required to pay out-of-pocket should the LLP fail
All personal possessions of the owner(s) are not at risk
If one partner messes up, it wouldn't impact any other partners within the LLP; only you would be accountable for the errors you made
Limited Liability Companies, or LLCs, are a popular structure for new businesses.
Entrepreneurs often choose LLCs for the following reasons:
1. Limited Liability Protection: In case of bankruptcy, the partners of the business do not lose any of their personal assets to repay creditors.
2. Low Compliance Costs: Compared to a private limited company, an LLC has far fewer compliance-related documentation, lower compliance costs, and far fewer required filings.
3. Flexible Partnership Structure: Partners may assign any responsibilities or duties to any other partner as they see fit. As compared to companies, there are no limitations placed on how LLC partners will divide the responsibilities or duties of the partnership or business.
4. Separate Legal Entity: A limited liability company can enter into contracts, open bank accounts, own property, etc., in its own name.
5. Simple to Form and Maintain: The process for forming an LLC is simple, paperwork is completed digitally, and an LLC can be formed with basic documentation.
Minimum of two partners (at least one must be a resident of India)
There is no maximum partner limit.
Digital Signature Certificates for all partners.
Designated Partner Identification Numbers (DPIN) for all partners.
Unique name for the LLC.
LLC's registered office address (may be home or commercial space).
Basic documentation: PAN, Aadhaar, and Address Proof.
Please make sure everything you need is ready before opening your LLC.
A step-by-step guide to the LLP Registration process
The easy-to-follow guide to registering an LLP in India is as follows:
Step 1: Obtain Digital Signatures (DSC)
The Digital Signature Certificate is required for all partners, as every single form that must be submitted must be submitted online. Obtaining a DSC takes approximately one business day.
Step 2: Apply for the Designated Partner Identification Number (DPIN)
All partners of the LLP must obtain a Designated Partner Identification Number (DPIN). The DPIN functions as the unique identification number assigned to LLP partners.
Step 3: Reserve the LLP Name
You will need to think of a name that will be unique and meaningful, as well as one that does not already belong to another LLP. The name of the LLP is reserved through the Ministry of Corporate Affairs (MCA) Portal.
Step 4: Submit all relevant LLP incorporation forms
You must submit all the necessary incorporation documents, including the details of each partner and the registered office address.
Step 5: Prepare the LLP Agreement
Step 6: Obtain your Certificate of Incorporation
The LLP will be registered with the Ministry of Corporate Affairs once the application is approved. Your newly registered LLP is now legally authorized to conduct business and operate.
Documents Required
In general, you will need to provide the following documents regarding the LLP and its partners at the time of registration:
For each Partner of the LLP
- PAN Card
- Aadhaar Card
- Passport-sized Photo
- Proof of Residence (Voter ID, Passport, Driver's License)
- Recent Bank Statement or Utility Bill
For the LLP's Registered Office Address
- Document Showing All Ownership/Rental Rights
- Recent Electricity Bill or Tax Assessment for the Property
- Letter of No Objection from the Occupant(s) of the Property with the Registered Office Address
LLP Registration Cost
Registration costs for an LLP are generally lower than those of a corporation. The registration cost primarily depends on:
The number of partners
The professional fees charged by the service provider you use
The registration fee is charged by the government.
In terms of overall cost to businesses, normally, businesses can expect to pay between ₹6,000 and ₹12,000 for their LLP registration, depending on what service provider they use.
Who Should Consider an LLP?
There are many types of businesses that are better suited to the LLP than other business structures. Examples of these businesses are as follows:
1. Small businesses
2. Professional services providers (i.e., CAs, Lawyers, Architects, etc.).
3. Startups with multiple business partners
4. Family-owned businesses that have multiple partners.
5. Business owners who want to have a limited number of compliance requirements.
Summary
An LLP registration is probably one of the best and most business-friendly ways to register your business in India. An LLP registration offers an excellent combination of protection, simplicity, and flexibility. An LLP is an excellent choice whether you are a new entrepreneur or are transitioning from being a traditional partnership firm. By registering an LLP, you can have the confidence and peace of mind that you are on the right path to growing your business successfully.
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