LLP Incorporation

Limited Liability Partnership (LLP) combines the benefits of a partnership with that of a limited liability company. In India, it took shape after January 2009 and was an instant success with startups and professional services. The idea behind LLP was to provide a form of business that is easy to maintain and to help owners by providing them with limited liability.

What are the advantages of registering a business as an LLP?

Limited Liability of Partners

Because an LLP can enter into a contractual relationship in its own capacity, it offers a great advantage to the partners for limiting their personal risk. Liability of financial contribution of any partner is restricted to the capital contribution as per the LLP agreement. Many new age businesses prefer LLP registration over partnership so that their personal assets remain safe in case of loss, or even insolvency. Further, one partner is not held responsible for the actions of negligence or misconduct of any other partner.

Operational Flexibility

LLP Agreement, deed among partners of an LLP, clarifies operating structure including rights and responsibilities of the partners. Typically, LLP would select a “Designated Member” who would control day-to-day operations. It can have individuals or existing businesses as members. Further, this structure allows to clearly define roles of the partners and their respective responsibilities. It could also help in protecting partner’s interest in case of loss because of an unlawful act of any other partner.

Separate Legal Existence

Registration of LLP creates a separate legal identity than its partners. Governed by the LLP Act of 2008, it allows the business to contract with other entities, take legal action, own assets and borrow funds in the name of an LLP itself. It is a major advantage that is not available to a regular partnership firm

Lower Compliance Requirement

A key benefit of registering an LLP over a private company is lesser compliance requirement. It doesn’t have a mandatory audit requirement until a certain level of turnover or contribution. Unlike companies, compliances related to board meetings, statutory meetings, etc. do not apply to LLPs. Professional services for compliance are typically available at cheaper rates than that for companies, making it cost effective to maintain an LLP.

Eligibility Criteria

To be eligible for registering as an LLP, the following criteria must be met:

At least two partners are required to form an LLP (no upper limit)
If a body corporate is a partner, a natural person must be nominated to represent it
Each partner must have an agreed contribution towards the shared capital
LLP should have an authorized capital of at least ₹1 lakh
At least one designated partner should be an Indian resident.

Documents Required for LLP Registration

To register an LLP you need scanned copies of the following documents:
From partners:
- PAN card or passport (foreign nationals or NRIs)
- Aadhar card/ voter’s ID/ passport/ driving license
- Latest bank statement/ telephone bill/ mobile bill/ electricity bill/ gas bill
- Passport-size photograph
- Blank document with specimen signature.
Note: One partner must self-attest the first three documents. In the case of foreign nationals or NRIs, all the documents must be notarized (if currently in India or a non-commonwealth country) or apostilled (if from a commonwealth country).
For the registered office:
- Utility bills
- Notarized rental agreement in English
- No-objection certificate from the property owner
- Sale deed/property deed in English (in case of owned property).