Limited Liability Partnerships (LLPs) are much better business vehicles than regular partnerships. They remove excess regulations of the Indian Partnership Act of 1932, which are impacted by personal liabilities. Furthermore, there are tax benefits, no audit requirements below a certain capital, and no cap with regard to the number of partners or capital contributions requirements.
An LLP in India should have the following qualities
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Entity with its own legal personality:
- An LLP can be formed by starting a business that meets certain requirements.
- Partnerships and Limited Liability Partnerships share the same attributes when it comes to profit distribution, taxes, and internal management. However, Limited Liability Partnerships are less financially liable.
- The maximum number of partners in a limited liability company is unlimited. Businesses with at least two partners are required to form LLPs.
- In the case of a body corporate that is a partner, a natural person can be nominated.
- Although each partner must contribute to the capital, there is no requirement for shared capital.
- LLPs (and companies) are not required to have any minimum capital contributions. The LLP must have a minimum of Rs. 1 lakh of authorized capital.
- An Indian resident must be at least one of the designated partners
- All partners should have a DPIN
- For all the Designated Partners, DSCs (Digital Signature Certificates) have been issued
- LLPs keep their registered offices in any premises. Even rented homes can be used as registered offices if a landlord’s NoC is obtained.
- As a result of the changes made to foreign investor regulations on November 10, 2015, foreign investors now have automatic access to 100% foreign direct investment. In LLPs, 100% foreign direct investment is permitted for companies that operate in industries or activities where the automatic route permits 100% foreign direct investment. There should also be no performance pre-requisites associated with foreign direct investment. As a result, foreign investments are made smoother and quicker with FDI in LLPs due to a clear interpretation of terms such as ‘internal accruals’ and ‘ownership and control’.
- In addition to this, LLPs are allowed to invest downstream in a different company or even choose LLP in those sectors that allow 100% FDI according to the automatic route. There is no FDI-related performance constraint.
Steps for Converting Partnership Firm into Limited Liability Partnership
The registration process for LLPs is seamless and hassle-free.
- Organize basic information about the partners
- Ensure that the information on the online form is accurate
- Sign up for digital signatures and DINs for your partners
- Ensure all legal documentation is prepared
- Check if the proposed LLP’s name is available
- Government departments and authorities verify all documents and forms
- Incorporate with ROC by filing the incorporation documents
- Incorporate your LLP with a certificate of incorporation
- Agreement for LLP drafting
- Agreement for the formation of a limited liability partnership
Click Here: Conversion of Partnership Firm into LLP
Step 1: Gathering DSCs and DINs
A Limited Liability Partnership begins with the obtaining of the DSCs of its desired partners. This is due to the fact that all forms must be completed online and require the digital signatures of the directors, as well as the requirement that all directors apply for a DIN number. Form DIR-3 is required for the application.
Step 2: Approval of the name application
There are two steps that are involved in the registration process of an LLP. Before you go ahead with this process, if the name of the LLP already exists, you need to check if it has been taken. You can check this on the MCA portal using the free search facility. The registrar will only approve LLP names that have not already been taken.
As well as not resembling any existing partnership firms, LLPs, trademarks, or body corporate names, the Registrar will only approve the name if the Central Government does not find it undesirable.
Step 3: Agreement for LLP
It is very important for LLPs to have an LLP agreement since it determines the rights and responsibilities among partners and between the LLP and the partners as well. A partnership agreement is entered into by the partners when the LLP registration is completed by filing Form 3 online on the MCA portal within 30 days of incorporation.
Step 4: Corporation Certificate for LLPs
Getting your LLP registered is the next step after your MOA and AOA are approved by the registrar. To obtain an LLP Incorporation Certificate, submit all the required documents to the registrar. The process usually takes between 2 and 12 days. Once you receive your LLP Incorporation Certificate, you are ready to begin.
Step 5: Get the PAN and TAN and open a bank account
In the first three weeks after receiving your incorporation certificate, you should apply with the NSDL for your company’s PAN & TAN. The procedure costs less than Rs.200 and takes approximately three weeks.
Read more
A Guide to Registering a Partnership Firm: 5 Lessons to Remember
What Is The Process For Registering A Partnership Firm In Chennai?
