Limited Liability Partnerships (LLPs) are corporate business structures that are essentially Partnerships, but combine the best features and benefits of companies. These include limited liabilities for owners, separation between management and ownership, and a mandatory need for registration. Such a combination allows professional expertise and entrepreneurial initiative to combine and operate in a flexible, innovative, and efficient manner.
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Like a Partnership Firm, the constitution of an LLP also depends upo the LLP agreement, a document signed by all its partners and containing all the terms and conditions mutually agreed among them. The LLP Agreement specifies details like capital contribution of the partners, their rights, obligations, profit sharing ratio, and the procedure for admitting and expelling partners.
What conditions must be met before setting up an LLP?
To set up an LLP, you must first fulfill the following prerequisites:
- Number of partners: To register an LLP, a minimum of two partners are needed. However, there is no maximum limit on the number of partners that an LLP can have.
- Prescribed Minimum Capital: Although there is no minimum amount of capital prescribed to set up an LLP. However, the partners must infuse sufficient capital for the smooth functioning of the business.
- Number of Designated Partners: Unlike the partners of a Partnership firm, the partners of an LLP are not obligated to control the management of the business. For this purpose, the partners may appoint designated partners, their minimum number being 2, with the requirement of at least 1 who is an Indian Resident. The maximum number of Designated Partners that a firm can have is 15.
- Unique and Valid Name: The name of the LLP must be distinct, original and not identical to the name of an existing company or LLP. Also the name must not be similar to a registered or an applied trademark. Read our blog on name guidelines to know more about how to select a valid name for an LLP.
- Registered Office Address: The LLP must have a registered address for its principal office or place of business before it begins the process of its formation and Registration.
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What are the benefits of forming an LLP?
Limited Liability Partnerships (LLP) combine the best features of private limited companies and partnership firms, so that they can benefit from both forms of business organizations. A list of all such benefits has been provided below.
- Liabilities of partners are limited in the ratio mutually agreed by them.
- Owing to its registration or incorporation, an LLP has a separate legal identity.
- An LLP can make purchases and open a bank account in its name because it has a separate legal identity.
- Forming an LLP is less expensive than forming a company.
- An LLP requires fewer compliances than in a Private Limited Company.
What are the documents required for LLP Registration in India?
The documents required for LLP registration can be categorized into the documents of all partners, of the applicant designated partner, of the registered business address, and other legal drafts. We have listed below all documents that are necessary for LLP registration in India. A failure to furnish any of these documents can result in the rejection of your LLP registration application form.
Partners' and Designated Partners’ Documents
Partners' Identity Proof
All partner and the applicant designated partner must produce any of the following documents as a proof of their identity:
- Voter ID
- Passport
- Driver’s license
- Aadhaar card
Along with the ID proof, the PAN cards of all partners are also required for the incorporation of the LLP. Before submitting the documents to the Registrar of Companies for the incorporation of the LLP, it must be ensured that the documents are accurate and updated.
Partners’ Address proof
Along with the ID proof, the PAN cards of all partners are also required for the incorporation of the LLP. Before submitting the documents to the Registrar of Companies for the incorporation of the LLP, it must be ensured that the documents are accurate and updated.
- Bank statement
- Electricity bill
- Telephone bill
- Water bill
Note that none of them should be older than two months.
Photograph
All partners and the applicant designated partner must submit their clear coloured passport-sized photograph with a white backdrop.
Passport
If the partner is a foreign national or a non-resident Indian, he must produce his passport as a document of Identity proof. The concerned authorities or the Indian Embassy of the nation where the foreign national or NRI is based must notarize and apostille this document.
Documents of registered office space of the LLP
- An LLP must have a registered address of its principal office or place of business before beginning the process of its incorporation. If it does not possess a registered office address, it can go ahead with its incorporation with a temporary address, but within 30 days from the date of its incorporation it must have a registered office address and intimate the same to the Registrar of Companies in form INC 22.
- If the registered office is rented, the rent agreement and the No Objection Certificate from the owner must be submitted during LLP registration. The landlord’s approval is required in order to let the LLP utilize the space as its “registered office”.
- In addition, any of the following utility bills can be furnished as documents of address proof – gas, electricity, telephone, or water bill not older than 2 months.
Digital Signature Certificate (DSC)
The online application for LLP registration must be signed using a Digital Signature Certificate. Since the application for LLP registration is signed by any one designated partner authorized to do so, by any or all of the partners, it is only the signatory designated partner that requires a DSC mandatorily before the registration of the LLP. However, post registration, there are a number of forms and applications that might need the digital signature of partners as well. Therefore, it is advised that all partners and designated partners obtain a DSC for future use.
Stepwise process of LLP registration
The steps to take while registering for a limited liability partnership are listed below:
- Obtaining a DPIN and DSC of the applicant designated partner
- Arrange all documents required for LLP registration beforehand, to avoid any hassle or hindrance during the process of registration.
- Registration of a Limited Liability Partnership (new registration).
- Reserve the name of the LLP using Form 1 or RUN application
- Fill out Form 2 for LLP registration and submit it with the prescribed documents
- After the registration of the LLP, draft and sign the LLP Agreement, and submit it within 30 days from the date of registration.
Conclusion
An LLP is completely responsible for fulfilling its obligations as it has a separate legal identity owing to its legal incorporation. A mutual agreement between the partners demarcates their rights and obligations in an LLP. The documents required and the procedure for LLP incorporation have already been elaborated above.
