Characteristics of LLP
An LLP offers a blend of legal protection and managerial ease, making it an ideal structure for professionals and growing businesses.
- Limited liability: Partners are liable only to the extent of their capital contributions, keeping personal assets safeguarded from business liabilities.
- Separate legal entity: An LLP is treated as a distinct legal body, independent of its individual partners.
- Perpetual existence: The entity continues to operate regardless of changes in partnership, ensuring stability and continuity.
- Operational flexibility: LLPs retain the agility of traditional partnerships, enabling partners to manage the business efficiently without complex governance.
Why choose an LLP?
An LLP offers a practical structure for entrepreneurs who seek operational freedom along with financial protection. Below are key reasons why many choose to register a Limited Liability Partnership:
- Personal asset protection: LLPs limit each partner’s liability to their capital contribution, safeguarding personal assets from business debts.
- Distinct legal identity: As a separate legal entity, an LLP can own assets, enter contracts, and initiate or face legal action in its own name.
- Continuity of business: The LLP remains unaffected by changes in partnership, allowing the business to operate without disruption.
- Lower compliance burden: Compared to private limited companies, LLPs face fewer statutory requirements, reducing both time and cost of compliance.
- Flexible structure: Partners have the autonomy to define their roles and responsibilities internally, enabling customisable and efficient business operations.
Eligibility and Prerequisites for LLP Registration
Before beginning the registration process, make sure you meet these essential requirements:
- Minimum Two Partners: At least two designated partners are required; there is no upper limit.
- Resident Designated Partner: At least one designated partner must be an Indian resident.
- Eligible Partners: Partners can be individuals (including foreigners or NRIs) or corporate entities such as companies or other LLPs.
- Unique LLP Name: The chosen name must be distinct and not similar to any existing trademark, company, or LLP.
- Registered Office: A physical office address in India (residential or commercial) is needed for official communication.
If you are planning to start an LLP and need funds for initial expenses, you could consider a personal loan for self-employed professionals.
Documents required for LLP registration
For Partners:
- PAN Card: Mandatory for all partners.
- Identity Proof: Aadhaar card, passport, or driver’s licence.
- Address Proof: Recent bank statement, electricity bill, or passport (not older than 2 months).
- Passport-sized Photograph
- Residence Proof for Foreign/NRI Partners: Passport copy, duly apostilled or notarised.
For Registered Office:
- Address Proof: Recent utility bill (gas, electricity, telephone) or property tax receipt in the name of the LLP or a partner.
- No Objection Certificate (NOC): Letter of consent from the landlord if the office is rented, along with a copy of the rental agreement.
Step-by-step guide to LLP registration
Registering a Limited Liability Partnership (LLP) in India involves several structured steps, starting from securing digital authorisations to filing the final partnership agreement. Below is a comprehensive guide to help you through the entire LLP registration process:
Step 1: Obtain a Digital Signature Certificate (DSC)
All forms related to LLP registration are submitted online, so designated partners must first acquire a Digital Signature Certificate (DSC). It is recommended to opt for a Class 3 DSC from a government-recognised certifying agency. The cost of obtaining the DSC may vary depending on the provider.
Step 2: Apply for Designated Partner Identification Number (DPIN)
Each designated partner must have a DPIN, which can be obtained by submitting Form DIR-3 along with identity and address proofs such as PAN and Aadhaar. This form must be verified and signed by a practising Chartered Accountant, Company Secretary, or Cost Accountant. Note that only individuals, not entities, can act as designated partners.
Step 3: Reserve your LLP name
Use the RUN-LLP (Reserve Unique Name) form on the MCA portal to propose a unique name for your LLP. You can suggest two names per application. Before applying, ensure that the name is not already taken by checking the MCA’s name availability tool. If required, one re-submission is allowed within 15 days. Once approved, the name reservation is valid for 3 months.
Step 4: File the incorporation form (FiLLiP)
To formally register the LLP, submit the FiLLiP form (Form for Incorporation of LLP) to the Registrar of Companies. If the designated partner does not already have a DPIN, it can also be requested through this form. Be sure to include the approved LLP name and pay the prescribed government fee at this stage.
Step 5: Submit the LLP Agreement
Within 30 days of incorporation, file the LLP Agreement in Form 3 on the MCA portal. This legal document outlines the mutual rights, duties, and obligations of the partners. It must be executed on non-judicial stamp paper, and the stamp duty applicable varies from state to state.
Step 6: Receive the Certificate of Incorporation
After successful verification of the incorporation form and documents, the Registrar of Companies will issue the Certificate of Incorporation. This marks the official registration of your LLP and allows you to commence operations legally.
Post-registration compliance for LLPs
Registration is only the first step. Keep your LLP in good standing by following these annual compliance requirements:
- Statement of Account & Solvency (Form 8): File within 30 days after 6 months from the end of the financial year (by 30 October).
- Annual Return (Form 11): File within 60 days of the financial year’s end (by 30 May).
- Income Tax Return (ITR): Must be submitted every year, regardless of income or profit.
- Mandatory Audit: Required if turnover exceeds Rs. 40 lakh or capital contribution exceeds Rs. 25 lakh in any financial year.
Advantages and disadvantages of LLP registration
Understanding the pros and cons of LLP registration can help you decide whether this structure suits your business needs.
Particulars
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Advantages
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Disadvantages
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Legal identity
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Recognised as a separate legal entity; can own property and sign contracts independently
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None directly, but requires legal compliance to maintain status
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Liability protection
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Partners’ personal assets are protected; liability is limited to capital contribution
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If partner count drops below two for over six months, LLP may be dissolved
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Compliance burden
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Lower compliance requirements compared to private companies; only two major filings annually
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Penalties apply for non-compliance, even if the LLP is inactive
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Capital requirements
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No minimum capital needed, enabling easy setup for startups and small businesses
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Limited ability to raise funds through equity; no shareholders allowed
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Cost efficiency
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Lower setup and maintenance costs than a company structure
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Less preferred by institutional investors due to non-equity model
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How business loans can help LLPs grow?
Once your LLP is registered, the next focus is growth. Whether you need funds for working capital, new equipment, or business expansion, a Bajaj Finserv Business Loan can give you the support you need.
Why choose Bajaj Finserv for your LLP?
- Collateral-Free Loans: Borrow up to Rs. 80 lakh* without pledging your business assets.
- Fast Disbursal: Receive approved funds in as little as 48 hours* for urgent business requirements.
- Flexible Tenure: Select a repayment period from 6 to 96 months that suits your cash flow.
- Minimal Documentation: Benefit from a quick, mostly digital application process.
Conclusion
Opting for LLP registration is a strategic decision for entrepreneurs who seek a structure that combines operational flexibility with limited liability protection. By fulfilling the necessary eligibility conditions and submitting the required documents, businesses can ensure a smooth and compliant setup process. To support the growth of your LLP, it is advisable to explore financing options. You can check your pre-approved loan offer for faster access to funds or apply for business loan to meet your expansion, equipment, or operational requirements.
Helpful resources and tips for business loan borrowers
