Advantages Of Registering An LLP In India

The Limited Liability Partnership Act, 2008, governs the formation and regulation of a Limited Liability Partnership (LLP) in India. An LLP is a corporate body formed to carry on lawful business to make a profit.

Once you register, your LLP exists as a separate legal entity. You need to follow the right procedure for LLP registration in India.  An LLP can have a minimum of 2 partners, whether persons, companies or LLPs. The partners of an LLP must make a written LLP agreement stating the responsibilities and rights of each of the partners. In case a written agreement is not made, the mutual rights of the partners are decided by the LLP Act.

The prerequisites for registering an LLP are that it should have a minimum of two partners. Out of the two partners, at least one must be a resident in India. A written LLP agreement should be made within 30 days of registering it. An LLP should have a registered address for its office.

LLP registration process

The forms have to be filed online with the MCA and signed digitally. The partners of an LLP should get a Digital Signature Certificate (DSC). Documents required are a PAN card, address proof and a passport-sized photograph.

According to the new rule, to reserve the name of LLP, the applicants must fill out the RUN-LLP (Reserve Unique Name – Limited Liability Partnership). Applicants will have to provide information such as the proposed name of LLP, its significance and more. You can provide a minimum of two names in an application.

In an LLP, at least two of the designated partners should get a Director Identification Number (DIN). If there are more than two partners, then they can be added later.

The documents required for registering an LLP are proof of office address, NOC from the owner of the property, copy of utility bills (not older than 2 months), LLP agreement, identity proof and address proof of partners who do not have a DIN, details of the LLP in which a designated partner is a director and copy of approval of LLP name.

The forms and documents are verified by the Registrar of Companies (ROC). If it is approved, then the registrar will issue the Certificate of Incorporation.

For an LLP, you have to apply for a PAN and TAN separately. The application is made to the Income Tax Department and is processed by it.

Advantages of registering an LLP

• An LLP can be formed without any minimum paid-up capital, whereas for a company, you need a minimum paid-up capital.
• Partners can withdraw money based on the LLP agreement. Partners can also reduce their liability after giving notice to the creditors.
• An LLP can provide interest on capital without any approval, based on the LLP agreement.
• A partner continues to be a part of the LLP even after transferring all the rights unless stated otherwise in the LLP agreement. A partner can resign from an LLP if required.
• A partner can be removed from an LLP based on the LLP agreement.
• The designated partner who is responsible for the company’s compliance has to be a partner in the LLP.
• An LLP is managed by the partners as per the LLP agreement. Partners can delegate their power to a team or a single partner.
• In a company, the directors are required to meet in every quarter and attend the general meeting of the shareholders. In an LLP, such meetings are not required, and the decisions are made according to the LLP agreement.
• The partners can take remuneration as per the LLP agreement.. For a company, there is no restriction in the Companies Act.
• In an LLP, there is no Dividend Distribution Tax; the profits are taxed and credited to the partner’s account. It is not taxed again when it reaches the individual partners.
• In an LLP, the account has to be audited by a Chartered Accountant if the turnover exceeds Rs. 40 lakhs or contributions exceed Rs. 25 lakhs.
• It is not required for an LLP to maintain any records, registers, or minutes unless it is stated in the LLP agreement. The partners decide the requirements.
• An LLP can have any number of partners, as there is no limit.