LLP Registration Online-An Overview
What is Limited Liability Partnership?
Limited liability partnership is in which all the partners have limited liabilities. In llp no one is responsible for the misconduct or negligence of another partner. The shareholder elects a BOARD OF DIRECTORS under the laws of variety state. At least two members are required to form the LLP company. Basically LLP is registered to spread the risk. Getting the advantage of putting different knowledge of individuals together to achieve a target of the organization.
Why We Need LLP companies?
As we all know that LLP is having a very flexible nature of partnership with the benefits of its partners of limited liability.
LLP is a separate legal entity from their members having perceptual succession so the one partner is not responsible for the misconduct of others.
Why register an LLP company? - Benefits
After deciding on your business model, it's important to choose between the Private limited company registration and LLP, by understanding their differences and advantages they provide, so as to choose what’s best for your business model.
The most vital reason for registering as LLP is the limited liability. The members of the firm are only liable for a small amount of debt incurred by it. This is entirely different from proprietorship and partnership where the personal assets of directors and partners are not protected if the business becomes bankrupt.
Separate Legal Entity:
LLP is a separate legal entity from the partners. Each partner can sue the other in case a situation arises.
It has an uninterrupted existence that follows perpetual succession, i.e., the partners might leave, but the business remains. A term of dissolution has to be mutually agreed on for the firm to dissolve.
Transferring the ownership of LLP is also simple. A person can quickly be inducted in as a designated partner and the ownership switches to them.
Suitable For Small Business:
LLPs having a capital amount less than 25 lakhs and turnover below 40 lakhs per year do not require any formal audits. It makes registering as LLP beneficial for small businesses and startups.
An LLP can own or acquire property because it is recognized as a juristic person. Partners of LLP cannot claim the property as theirs.
No Owner /manager Distinction:
An LLP has partners, who own and manage the business. This is different from a private limited company, whose directors may be different from shareholders. For this reason, VCs do not invest in the LLP structure.
Documents required for registration of an LLP.
- PAN Card of all partners
- Foreign nationals may provide passport.
Partners Address Proof
- Aadhar Card/ Voter ID/ Passport/ Driving License of all partners.
GST Registration Documents for Companies.
- Latest Passport size photograph of all partners.
Business Address Proof
- Latest Electricity Bill/ Telephone Bill of the registered office address.
NOC from owner
- No Objection Certificate to be obtained from the owner of registered office.
- Rent Agreement of the registered office should be provided, if any.
In case of NRI or Foreign National, documents of the partner must be notarized or apostilled.
What is the eligibility of designated partners/partners in an LLP?
Any individual, or even a company or an LLP, can become a partner. However, only an individual can become a ‘designated partner’ in an LLP.
- If the total business turnover exceeds ₹ 40 Lakh/₹20 Lakh in case of business of goods/providing service respectively in the concerned financial year (Threshold for North-eastern States is ₹ 20 Lakh/ ₹ 10 Lakh in case of business of goods/providing service respectively)
- Casual taxable person / Non-Resident taxable person
- Agents of a supplier & Input Service Distributor (ISD)
- Electronic Commerce Aggregator
- Person supplying through an E-commerce platform
In addition to above, there are certain other criteria when registration is mandatory. Apart from compulsory registration, one can also apply for GST registration voluntarily.
I am an NRI. Can I start an LLP business in India?
Yes, non-resident Indians and foreign nationals who are willing to enter into an LLP partnership can do so, provided they submit the necessary documents after getting it notarised by the concerned authorities. Although, at least one of the designated partners in an LLP should be an Indian national.
What are the rules of starting an LLP?
Any group of persons who have or want to invest money in a business can start an LLP. A person or an investor becomes a partner, according to the LLP agreement, as provided in the Act of 2008. Also, the investors/partners are owners of the business started under the LLP.
What is an LLP agreement?
An LLP agreement is one that is made between the partners and the LLP regarding the relationship between the individual partners in the LLP. An LLP agreement usually consists of management policies, inclusion of new partners, policy making strategies, and so on.
What is the minimum number of partners required to start LLP?
According to the LLP Act, a minimum of two designated partners are required to start an LLP. The designated partners are responsible for fulfilling all the essential requirements involved in starting and running an LLP.
What kind of start-ups commonly register LLPs?
Typically, only start-ups that will not be looking for venture capital funding register LLPs. This is because venture capitalists only invest in private and public limited companies.
Is it cheaper to run an LLP than a private limited company?
Yes, it is much cheaper to run an LLP than a private limited company, particularly in your early start-up days. This is because many compliances, such as an audit, apply to LLPs only after their turnover is sizeable. Most LLPs spend about half as much as a private limited company in their first year on registrations and compliance work.