Due to foreign direct investment in limited liability partnership,
new avenues have opened for setting up LLP
in India and facilitate the entry of international companies in this
country. An LLP is a combined corporate structure that includes the benefits of
a public and a private partnership firm. It entails limited liability for the
partners such as the company and the tax benefits of the partnership firm. For
the people with companies that are incorporated outside the country or those
residing out of India can start a partnership firm in the form of capital
contribution or by acquiring the profit shares. Therefore, an investor can
become a partner of the LLP via capital contribution or receiving partnership
share from an existing partner..
Pros of setting up an LLP in
Before going into the
norms of setting up a business in India, it is necessary to judge the
It is easier and simpler
to set up an LLP and less expensive to incorporate when compared to a company.
They have no compulsory
requirement for account auditing unless the annual turnover goes beyond 40
lakhs or contribution of LLP exceeds INR 25 lakhs.
For the registration of
an LLP, there is no minimum capital requirement.
Unlike the companies, LLPs are not subject to Alternate Minimum
Tax (MAT) or Dividend Distribution Tax (DDT).
Besides this, LLPs enjoy a lower tax rate in comparison to that the
As a separate legal entity, an LLP restricts the liabilities of
its partners up to the agreed amount of contribution. Moreover, the partners are not liable to pay
the company debts from their assets.
On the whole, LLP protects the partners including the foreign
investors from unlimited liability risks, when compared to the partnership or
sole proprietorship firms.
In comparison to a private limited company, there are no
restrictions imposed on the partners, and they are free to enter into any legal
contracts outside India.
Those who are already
planning a business set up in India must review the advantages of forming a
Setting up an LLP
If you are a part of
the service industry and plan to go ahead with a new startup, which is risky or
thinking of beginning with a business wherein different partners, have their
roles to play, incorporating as LLP is undoubtedly the best choice to make.
Moreover, the process of this setup is exceptionally streamlined as it can be
completed online within a period of a few business days.
Business idea and partners
Regardless of the
structure of the business, you wish to adopt. Having a business idea or product
and service is necessary. For
registering as an LLP, the minimum requirement is two partners although there
is no maximum limit when it comes to the number of partners you want to have.
However, one of the partners must belong to India.
Applying for the director’s identification
number or DIN of the partners
The director of the
incorporation must have a unique and separate DIN, and LLP’s must have two
partners acting as the directors of the incorporated entity although there is
no upper limit. With the DIN, the firm can protect itself from scam and
fraudulent incidents. It helps in maintaining a public register of directors
and makes it easy to trace them if they are involved in some fraud. The
business entities can apply for DIN from the website of the Ministry of
Corporate Affairs. It is a simple process in which you have to provide a few
documents related to the identification and fill some forms. When you pay the
registration amount and sign the forms after uploading their scans, you can get
the DIN. You can also consult with the lawyers in India if you are stuck with
the process and need assistance to move ahead.
Application for DSC or Digital Signature
To stay updated with
the advancement of technology. Multiple transactions in the digital sphere, it
is essential to make the process of verification electronic instead of
depending on the traditional methods. With the DSC containing the relevant
details of the person to which it belongs, it is easy to provide a secure or
verified way of the online transaction. You need to have a few certificates of
residence and identity proof to apply for the documents on the website.
Name approval and verification
For those who have
already conceived the India entry strategy, the next step is to obtain a unique
name, which is not trademarked by the others. After this, you have to file Form
1, which is them verified by the registrar of companies.
Filling the incorporation and subscription
These documents are
also referred to as Form 2 and need to be filled by the designated partner in
the presence of an eligible professional.
Certificate of incorporation
After the verification
of Form 2 and satisfying all the other requirements, the Registrar of Companies
is going to send the Certificate of Incorporation also known as Form 16. The
LLP will come into existence on the date of the issue of the Certificate of
incorporation. The law firms in
India are going to assist you throughout in completing the process
Drafting and Filing the LLP agreement
The partners have to draft
and file the LLP agreement within 30 days of the issue of the Certificate of
Incorporation and submitted to the Registrar of Companies in Form 3. Once the
approval of Form 3 is granted for the Limited Liability Partnership, it can
commence business and start earning money.