Posted by When you decide to start a business in India, you get a lot of options to choose from. These options include formal and informal business structures. Proprietorship firms and partnership firms are informal business structures that do not have any governmental mandates for incorporation. However, formal business structures such as Private Limited Companies, One Person companies, and Limited Liability Partnerships require a mandatory incorporation process to initiate business in India. Out of all these business structures, people have gradually started opting to go ahead with LLP Company registration in India.
LLP Companies in India
The reason behind this shift in interest is the fact that being a hybrid model, LLP combines the major advantages of a private limited company and a partnership firm. Hence, it bridges the gap between informal and formal business structures. The major benefits of LLP company registration in India are:
- Limited liability of partners;
- Cost-effectiveness;
- Easy incorporation process;
- Separate legal existence;
- Right, to buy, own and sell properties;
- Eligible for DPIIT recognition;
- Easy management; and
- Perpetual succession/
There are many other benefits of getting LLP company registration in India. Such as the fact that when taxes are concerned, the LLP is treated as a partnership, and it is not taxed separately for its income. The partners are only individually taxed. Further, even the Foreign Trade Policy allows 100% Foreign Direct Investment (FDI) in LLP companies registered in India. This further encourages foreign investors to invest in Indian businesses.
Since there are so many advantages of LLP companies in India, the government of India has ensured to make certain mandates to start an LLP company. Through this article, let’s take a look at all mandates.
Partners and Designated Partners
As the name suggests, when two or more people come together and initiate a business it is a partnership. The best part of this requirement is that the minimum requirement is 2 partners. However, there is no upper limit cap. Hence, you can have as many designated partners and partners in your Limited Liability Partnership firm as you want. With that said, it is not mandatory to have all partners be individuals, they can also be corporate entities or legal persons. The difference between a partner and a designated partner is that the designated partners are the ones responsible for all compliance and statutory requirements of the LLP.
Digital Signature Certificate (DSC)
All designated partners of a Limited liability partnership must have their individual DSC (digital signature certificate). DSC is the most secure form of electronic signature. Concerning LLP company registration, it is used as a verification while submitting all the incorporation-related documents to the Ministry of Corporate Affairs (MCA) portal.
Director’s Identification Number (DIN)
Along with the DSC, it is also mandatory for all designated partners to an LLP to obtain their unique Digital Identification Number (DIN). DIN is a number that is allotted to all Directors in India. Whether they are a part of private limited companies or even if they are designated partners in an LLP. DIN verification happens for all DIN holders in India. This verification process ensures that there are no fraudulent DIN holders Directors or Designated Partners in the country.
Reserving Unique Name
Before the partners of an LLP can apply for its registration, they need to reserve a unique name for their limited liability partnership. For this, the partners need to give two suggestions of names along with other documents. Then, the Ministry will go through its database. If the name proposed is unique and does not violate the trademark of any company or is not similar to any other existing names, they will give you approval. If the proposed names are rejected, you can re-apply for the reservation of names.
Submit incorporation form with documents
The incorporation form for LLPs is the FiLLIP. In this form, the partners are supposed to provide all the details related to the LLP. Further, the designated partners can also use this form to apply for their DIN, if they do not have one already. Once you submit the FiLLIP, the ministry will go through all the relevant documents submitted, and issue a certificate. This certificate will display a 7-digit number unique to your LLP. It is known as the LLPIN.
LLP Agreement
Once you get the LLP incorporation certificate, you need to file the duly executed version of the LLP agreement within 30 days. The LLP Agreement has all details of the roles and responsibilities of the various partners, their profit-sharing ratio, etc. Even the business activities are a part of the LLP Agreement. The partners have to get a due notarization with appropriate stamp duty on this agreement before submitting it to the MCA.
Obtaining PAN and TAN
Once you submit the LLP Agreement, you can begin with your business activities. However, since the LLP is a body corporate and has a separate legal existence, it is mandatory to obtain a separate PAN and TAN of the LLP Company. The permanent account number (PAN) and the Tax Account Number (TAN) are required to comply with the annual and statutory compliance requirements of an LLP company in India.
Conclusion
Running an LLP company in India is not that difficult if you keep constant track of all the compliance requirements. Even after the registration process is complete, there are many other annual filings that you need to be aware of, such as Form 8 and Form 11. There are many certified experts available online that can help you out in running your LLP successfully.