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What is an LLP?
A Limited Liability Partnership is a form of business entity governed by the Limited Liability Partnership Act, 2008. It is a body corporate with a legal existence separate from its partners. In a traditional partnership, partners are personally liable for business debts. In an LLP, each partner’s liability is limited to their agreed contribution. Partners are also not responsible for the misconduct or negligence of other partners.
Who should consider an LLP?
An LLP suits professionals such as CAs, lawyers, architects, and consultants. It also works well for small and medium businesses, family businesses, and startups that want limited liability without the heavier compliance of a private limited company. It may be less suitable for businesses planning to raise equity funding from investors, since a private limited company is generally preferred for that.
Key features of an LLP
- Separate legal entity: The LLP can own property, enter contracts, and sue or be sued in its own name.
- Limited liability: Partners’ personal assets are protected from business liabilities.
- Perpetual succession: The LLP continues to exist even if partners change, retire, or pass away.
- No minimum capital: Partners can start with any amount of contribution.
- Flexible internal management: Rights, duties, and profit sharing are governed by the LLP Agreement.
- Lower compliance: Fewer statutory requirements than a company, and a mandatory audit applies only above prescribed turnover or contribution limits.
Minimum requirements
- At least two partners, which can be individuals or body corporates
- At least two designated partners who are individuals, with at least one resident in India
- A registered office address in India
- A unique name that is not identical or similar to an existing LLP, company, or trademark
Documents generally required
- Partners: PAN, Aadhaar or another identity proof, an address proof, and a photograph.
- Registered office: A recent utility bill, plus a rent agreement or ownership proof.
- Owner’s consent: A No Objection Certificate (NOC) from the property owner.
Incorporation process
- Digital Signature Certificate (DSC): Designated partners obtain a DSC to sign forms electronically.
- Name reservation: The proposed name is applied for and approved through the MCA portal.
- Incorporation filing: The incorporation form (FiLLiP) is filed with partner details, the registered office, and contributions. A Designated Partner Identification Number (DPIN) is allotted if partners don’t already have one.
- Certificate of Incorporation: Once approved, the Registrar issues the certificate with a unique LLP Identification Number (LLPIN). PAN and TAN are generally allotted along with it.
- LLP Agreement: The partners execute the agreement and file it with the MCA within 30 days of incorporation.
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