How to Start Limited Liability Partnership (LLP) firm in India

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 India

Before going into the norms of setting up a business in India, it is necessary to judge the advantages accurately.

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 companies enjoy.
  • 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 company.

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 Certificate

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 document

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 successfully.

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.

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