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What is LLP?
The Limited Liability Partnership (LLP), which combines the advantages of a partnership firm and a corporation into one form of organization, has grown to be a favorite among entrepreneurs. 2008 saw the introduction of the Limited Liability Partnership (LLP) model in India. An LLP combines elements of a partnership firm and a corporation. In India, LLPs are governed under the Limited Liability Partnership Act, of 2008. To form an LLP, a minimum of two partners are needed.
The maximum number of partners in an LLP is unrestricted, nevertheless. A minimum of two chosen partners must be persons and at least one of them must have a residence in India among the partners. The LLP agreement governs the obligations and rights of chosen partners. They bear primary responsibility for ensuring that all LLP Act of 2008 and LLP Agreement provisions are followed.
Is LLP Registration Mandatory?
Yes, it is required to register an LLP on the Ministry of Corporate (MCA) web. To be a recognized legal body, an LLP must register under the Limited Liability Partnership (LLP) Act. For all firms, LLP company registration is not essential as of my most recent update in September 2021. It is optional and offers partners only a thin layer of responsibility protection. The creation of the firm, its goals, and its desire for legal recognition and liability protection all play a role in the choice to register as an LLP. To comprehend the ramifications and regulations based on their particular jurisdiction, businesses should speak with legal and financial professionals.
Who may join an LLP as partners:
A partner in an LLP might be any person or corporation. However, LLPs do not allow partners who are children, mentally ill, or have not been declared insolvent.
In An LLP, How Many Chosen Partners Are Necessary?
Each LLP must have a minimum of two designated partners, one of whom must be an Indian citizen. All body corporate partners in an LLP must designate at least two of their individual nominees to serve as designated partners. According to the LLP agreement, any partner may be a designated partner. LLP Registration Services start your business Ease with SRV Associates . SRV Associates also offer trouble-free MSME registration online services for your business.
Benefits of LLP
- Tax advantages- In an LLP, the tax rate is lower than in other business structures, and it is also excluded from a number of taxes, including the minimum alternative tax and the tax on dividend distributions.
- No minimum capital contribution is necessary- There is no required minimum capital to incorporate an LLP. Before incorporating, there is no requirement that you have a minimum amount of paid-up capital. Any amount of capital that the partners give can be used to form it.
- less time is needed to set up
- An LLP is simple, less expensive, and takes less time to establish.
- Distinct legal entity- Like corporations, LLPs are separate legal entities. Separate from its partners is the LLP. An LLP has the legal right to bring and defend claims in its own name. The contracts are executed in the name of the LLP, which contributes to building trust with key constituencies and inspires confidence in the company among clients and suppliers.
- Limited partners’ liabilities- The LLP’s partners are only partially liable. The partners’ liability is restricted to the contributions that they made. As a result, they are solely responsible for paying the contributions they made and are not held personally accountable for any corporate losses. When an LLP is winding up, only the assets of the LLP are responsible for paying out its debts if it becomes insolvent. The partners are free to conduct themselves like respectable businessmen because they are not personally liable.
- Low price and minimal compliance- Compared to the expense of incorporating a public or private limited business, the cost of forming an LLP is cheap. The level of compliance required of the LLP is also modest. The LLP only needs to submit the Annual Return and a Statement of Accounts and Solvency twice a year.
LLP Penalty Drawbacks for Non-Compliance
- Less credible- When compared to other corporate structures, LLPs are seen negatively by the public. Despite the fact that an LLP has many advantages, some people still prefer other company structures over LLPs.
- LLP winding up and dissolved- An LLP must have a minimum of two partners. The LLP will be dissolved if the required two partners are not present for a continuous period of six months. If the LLP is unable to pay its debts, it could be dissolved.
- The amount of compliance- That LLP must adhere to is small. However, the LLP will face significant fines if these compliances are not finished on time. The LLP must submit annual returns to the Ministry of Corporate Affairs (MCA) even if there is no activity throughout the year. The LLP will be subject to a severe fine if it fails to file the returns.
- Difficulty in raising money- The LLP does not have shareholders or the idea of equity like a company. Venture capitalists and angel investors are not permitted to become shareholders in the LLP. This is due to the requirement that the shareholders join the LLP as partners and assume all partner duties. Thus, it is challenging for LLPs to raise cash because angel investors and venture capitalists prefer to invest in companies rather than LLPs.
Duration of LLP Registration
The formation of an LLP takes about 10 days, subject to departmental permission and departmental return, from receiving a DSC to filing Form 3. Our LLP registration services enable fast inversion with a simple and easy process. Whether you are a small business or a large corporation, SRV Associates is a reliable and experienced GST registration consultant in Noida with efficient and effective services with the latest GST laws and regulations.
Documents Required For LLP Registration
- AN Card/ ID Proof of the Partners
- Address Proof of the partners
- Proof of Registered Office Address
- Residence Proof of Partners
- Digital Signature Certificate
- Designated Partner Identification Number
- Passport (in case of Foreign Nationals/ NRIs)
How to Register an LLP
- Step 1: Apply for DSC and get a DSC (Digital Signature Certificate)
- Step 2: Request a DPIN (Designated Partner Identification Number, Form 7 is required)
- Step 3: Submit an application for name approval and availability (needs Form 1/ RUN-LLP).
- Step 4: Form 2/FiLLiP is required for LLP incorporation.
- Step 5: Submit LLP Agreement Form (requires Form 3)LLP Agreement: It is, as the name implies, a written agreement between the LLP and its chosen partners or between the LLP and its partners. The LLP Agreement establishes the selected partners’ obligations to one another and to the LLP.