Registering a limited liability partnership is the most popular way of starting a professional services firm. It has various tax advantages and minimal compliance requirements.
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Limited Liability Partnership (LLP), introduced only in 2008, has quickly become a popular legal structure for businesses. Its main improvement over the General Partnership is that, as the name indicates, it limits the liabilities of its partners to their contributions to the business and also offers each partner protection from the negligence, misdeeds or incompetence of the other partners.
The LLP is also cheaper to incorporate than a private limited company, requires fewer compliances and can be a smart choice from a tax perspective. However, if you're looking to raise venture capital or attract talent with employee stock options, private limited is the way to go as LLPs cannot easily accommodate it. This is why they are most popular with professional services firms (web designers or architects, for example) that require no equity funding.
All the proposed partners need a Digital Signature Certificate (DSC), which is necessary to get them a Digital Partner Identification Number (DPIN). You will only need to provide a handful of scanned documents; our representatives will ensure the forms are correctly filled.
As soon as we apply for the DSC, we will ask you for the unique name you wish to give your LLP. These will be used to file for incorporation with the MCA. The Certificate of Incorporation will be approved at the end of this process.
Every LLP needs a registered Permanent Account Number (PAN) and Tax Account Number (TAN). We will make the application online ourselves, but you will need to courier hard copies of the required documents yourself. The PAN and TAN will be couriered to the your registered office address in 21 working days.
The Designated Partner Identification Number (DPIN), which the two proposed designated partners must apply for, requires the following: passport-sized photograph, a scanned copy of either the telephone bill, driver’s license or previous two months bank statement, soft copy of the PAN card and a completely filled form. If the partner is a non-resident Indian, then a copy of the passport will replace the PAN card. The passport copy and address proof should be notarised by the Indian embassy, a foreign public notary or company secretary in full-time employment.
With the DPIN, you can apply for the DSC for the two designated partners. The documents you need to submit for this are the same as those you need for DIN 1, along with the e-form.
You need to fill e-form 1 (available on llp.gov.in) to reserve the name of your LLP. Along with this, you must provide the main objects of your business and the significance of the name. You can check the availability of your name for free online. Factors to consider in LLP name reservation: a) Your name must be unique, at least in the sector in which you operate. b) There cannot be a trademark by the same name. You can verify this by running a search for free. c) You must include the business activity in your name. d) Abbreviations, adjectives and generic words are rejected, as are the words bank, exchange and stock exchange (unless you have the approval or RBI or SEBI).
The documents filed for name reservation are examined, and, if approved, you can file the incorporation documents and subscription statement in e-form 2. This must be done within 60 days of name approval. If e-form 2 is accepted, you will receive the certificate of incorporation. But you’re still not done. Within 30 days from the receipt of incorporation certificate, you will need to file the LLP Agreement Form-3. The government will verify this and, if satisfied, approve your LLP Agreement.
Businesses often need to borrow money. In a General Partnership, partners are personally liable for all this debt. So if it cannot be repaid by the business, the partners would have to sell their personal possessions to do so. In an LLP, only the amount invested in starting the business would be lost; all personal property would be safe.
An LLP only requires audited annual returns to be filed if it has a turnover of greater than Rs. 40 lakh or capital contribution of over Rs. 25 lakh. It also needs to communicate fewer business transactions and structural changes than a private limited company.
There are some important advantages over the private limited company. For example, Dividend Distribution Tax and tax surcharge don't apply. Loans to partners are also not taxable as income.
|Limited Liability Partnership||One Person Company||Private Limited Company||Partnership Firm||Sole Proprietorship|
|Professional services firms||Solo promoters||Start-ups and growing companies||Home businesses||Small manufacturers & traders|
Ease of Accommodating Investment
|Possible, but unlikely||Possible, but severely unlikely||Very easy to accommodate||Almost impossible||Impossible|
Limited Liability Protection
|Most efficient||Few benefits||Few benefits||Minimal||Minimal|
|Know More »||Know More »||Know More »||Know More »|
Just tell us a little bit about your business and you'll have the incorporation certificate in 20 working days. It's that simple. In addition to yours, we'll be handling around 400 requests this month.
We make your interaction with government as smooth as is possible by doing all the paperwork for you. We will also give you absolute clarity on the process to set realistic expectations.
Our team of experienced business advisors are a phone call away, should you have any queries about the process. But we'll try to ensure that your doubts are cleared before they even arise.