How to register an LLP company | LLP registration in india | LLP registration process
Registering a company is the most important step in the incorporation of a business. It is very crucial to choose the right structure of the company for registration. In India, every business must register themselves as part of the mandatory legal compliance. In a month, thousands of companies get registered. However, still, there are the second-highest number of unregistered businesses in our country. So it is required that every business to get registered as a legal entity.
Registration of your business will bring a lot of benefits.
Benefits of company registration in India-
Limited liability protection: The biggest benefit of registering any company (Private limited, limited liability, Public limited) is that it has limited liability protection. Running a business involves more risk in it which means you only legally responsible for all aspects of your business, including any debts and losses. Limited liability protection ensures that the entrepreneur can take risks without the fear of losing his/her personal assets or savings.
Easy to Exit: In registered business entities like company or LLP, the business is considered a separate legal entity with assets and liabilities that are separate from its promoters. Therefore transferring the ownership of a registered business is easy.
Capital Generation: In a registered company, your ability to attract investors and raise money for your business will be easier. Registration of the company is important to obtain debts and borrow loans. As most banks and financial institutions prefer to lend to registered business entities. So, it is highly recommended to register a business if there are plans for raising debt or equity funds in the name of the business.
Before we learn how to register a company? let’s first try and understand the different types of business structures in India.
There are different types of company registration in India-
How to choose a business structure before applying for company registration?
- How many partners are there in your company/firm: If you are a single person who owns the entire initial investment required for the business, a One Person Company or sole proprietorship would be ideal for you. Whereas, if your business has two or more owners and relies on many parties a Limited Liability Partnership or Private Limited Company or Partnership firm would suit you best.
- Investment in your business: The total investment in your company also decides the type of company registration. If you want to spend less, then it would be wise to go in for a Sole Proprietor, or a HUF or a Partnership.
- Liability of the directors/partners: The other important aspect is that of the liabilities of the directors. In certain business structures like a partnership firm, One person company, and HUF the liability of directors and partners is unlimited. This means, in case of any default in loans, the entire money will be recovered from the members or partners in the profit-sharing ratio. On the other hand, in companies such as limited liability partnership, the partner’s liability is limited. This means that the liability of its members is restricted to the amount of contribution made by them or the value of shares each member holds.
- Income Tax Rates Applicable to businesses income tax rates applicable to a sole proprietorship and a HUF are the normal slab rates. In the case of a sole proprietorship, the business income is clubbed with the individual’s other income.
Limited Liability partnership registration-:
A Limited Liability Partnership is a type of partnership in which partners’ liability is very limited. In limited liability, the term “limited’’ denotes that there is limited liability and partners are not entirely responsible for the company. In an LLP, one partner is also not liable for another partner’s misconduct or negligence. This is the fundamental difference from that of an unlimited partnership.
Limited Liability partnerships tend to rely heavily on reputation. And the reducing costs in an LLP allows the partners to realize more profits from their activities than they could individually. The partners in an LLP act can also have a number of junior partners in the firm who work for them in the hopes of someday making full partners. And junior partners have no stake in the partnership they are paid salaries for their work. Following are the features of limited liability partnerships–
- LLP is a separate legal entity
- The liability of each partner is limited to the contribution made by the partner
- The cost of forming an LLP is limited
- Less compliance and regulations
- No requirement of minimum capital contribution
The minimum number of partners to incorporate an LLP is two There is no upper limit on the maximum number of partners of LLP. Among the partners in an LLP two should and designated, and at least one of them should be resident in India. The rights and duties of partners in an LLP are governed by the LLP agreement. They are directly responsible for the compliance of all the provisions of the LLP Act 2008 and provisions specified in the LLP agreement.
If you want to start your business with a Limited Liability Partnership, then you must get it registered under the Limited liability Partnership Act, 2008.
What are the benefits of limited liability partnership registration?
Limited liability Protection- One of the biggest benefits of such a company is limited liability protection. These companies are treated as a single entity that makes the firm responsible for all debts if anything happens to the company or entity.
Separate legal entity: A private limited company is a legal entity, established under the Companies Act 2013. A member (Shareholders/Directors) has no personal liability to the creditors of a for the company’s debt.
Easy transferability: The ownership of the firm can easily be transferred by transferring the shares of the firm. Transferability or sharing the owners of the company becomes the major hurdle in unregistered partnerships.
Borrowing Capacity: Limited Liability Companies can also raise equity funds in India.
What is the procedure of LLP company registration?
Step 1: Get Digital Signature Certificate (DSC)
The first is to get the digital signature certificate. DSC is the digital format of all the physical forms of documents. So before initiating the process of registration, you must apply for the digital signature of the designated partners of the proposed LLP. So, the designated partner must obtain their digital signature certificates from the government recognized certifying agencies.
Step 2: Director Identification Number (DIN)
You have to apply for the DIN of all the designated partners or those intending to be designated partners of the proposed LLP.
The application for allotment of DIN has to be made in Form DIR2. You have to attach scanned copies of documents (usually Aadhaar and PAN) to the form. The form shall be signed by a Company Secretary in full- time employment of the company or by the Managing Director/Director/CEO/CFO of the existing company in which the applicant shall be appointed as a director.
Step 3: Reservation of Name
LLP-RUN(Limited Liability Partnership-Reserve Unique Name) is filed for the reservation of the name of proposed LLP which shall be processed by the Central Registration Centre under Non-STP. But before quoting the name in the form, it is recommended that you use the free name search facility on the MCA portal.
Step 4: Incorporation of LLP
Step 5: File Limited Liability Partnership Agreement:
LLP agreement governs mutual rights duties amongst the partners-
- LLP agreement is filled in form 3 on MCA portal
- Form 3 for the LLP agreement has to be filed within 30 days of the date of incorporation.
- The LLP Agreement should be printed on stamp paper.
Documents required for LLP registration-:
PAN Card: PAN card of the directors and shareholders. In case if the director belongs to the foreign national then a copy of a passport is entailed.
ID Proof: Adhar card, voter id and driving license of shareholder and director.
Address proof: Telephone bills, electricity bills, water bills, and bank statements are also required for private limited company registration.
Scanned passport size photo of the director
Registered office proof