Metiscon Solutions

REGISTER START-UP AS
LIMITED LIABILITY PARTNERSHIP

Limited Liability Partnership (LLP) was introduced in India by way of the Limited Liability Partnership Act, 2008 as a way to provide a type of business entity that is simple to maintain while providing limited liability to the owners. LLP is one of the easiest forms of business to incorporate and manage in India. With an easy incorporation process and simple compliance formalities, LLP is preferred by Professionals, Micro and Small businesses that are family owned or closely-held. Since, LLPs are not capable of issuing equity shares, LLP should be used for any business that has plans for raising equity funds during its life cycle.

The main advantages of a LLP over a traditional partnership firm are that in a LLP, one partner is not responsible or liable for another partner’s misconduct or negligence besides limited liability protection for the owners from the debts of the LLP. All partners in a LLP enjoy a form of limited liability protection for each individual’s protection within the partnership like shareholders of a private limited company. At the same time unlike private limited company shareholders the partners of a LLP have the right to manage the business directly.

OTHER RELATED SERVICES

REGISTRATION
GOODS AND
SERVICES TAX

Most businesses choose to register for GST right from the beginning even if it does not apply to them immediately since it has multiple advantages.

REGISTRATION PROFESSIONAL TAX

Has to be done within 30 days of setup. in many states even if there are no employees when the business starts its journey.

REGISTRATION
SHOPS AND ESTABLISHMENTS

A law driven by welfare of workforce almost all businesses fall within the scope of this state law and are required to register within 30 days

REGISTRATION
UDYAM AADHAR
CERTIFICATE

A facilitating legislation for the benefit of Micro Small Medium Enterprises (MSME) this provides access to a host of benefits for the business

DOCUMENTATION FOR DESIGNATED PARTNERS & PLACE OF BUSINESS

DOCUMENTS FOR DESIGNATED PARTNERS

COMPULSORY

  1. Passport size photograph
  2. PAN Card – scan of front and reverse
  3. Aadhaar Card – all 12 digits must be clearly visible

IDENTITY PROOF - any one document

  1. Passport
  2. Driving License
  3. Voter ID

** The designated partner need not presently be resident at the address mentioned in the ID proof document.

ADDRESS PROOF - any one document

  1. Electricity Bill
  2. Bank Statement
  3. Landline or Broadband bill
  4. Mobile Phone Bill

** (1) Bill should be in the name of designated partner – joint names are acceptable (2) Bill should be less than 60 days old.

 

DOCUMENT REQUIRED FOR PLACE OF BUSINESS

OWNED BY ANY DESIGNATED PARTNER

  1. Electricity Bill OR   Landline Bill   OR Broadband bill   OR Gas Bill
  2. No Objection certificate from director

** (1) Proof of ownership like sale document may be called for by MCA if it considers it necessary. (2) Utility bill must be less than 60 days old at time of application

RENTED OFFICE PREMISE

  1. Rental Agreement
  2. Electricity Bill OR Landline Bill OR Broadband bill OR Gas Bill
  3. No Objection certificate from landlord

** Utility bill must be less than 60 days old at time of application

TEMPORARY OFFICE PREMISE

A LLP may be registered at a temporary premise with a utility bill and and a No Objection from the owner of the property in the same way as if owned by director.

** If the option of a temporary office is taken then the LLP is required to submit details of its’ registered office within 30 days of its’ incorporation. 

STEPS TO REGISTER YOUR STARTUP LLP

WHAT FACTORS YOU SHOULD CONSIDER

Once you have a vision for your business you will need a vehicle or structure for delivering it which is the organisation. To choose the format of the organisation you will need to consider recognisation of the structure or credibility, risk associated with it, speed and flexibility of decision making, ability to quickly scale up and and ease of access to funding. CONGRATULATIONS ON CHOOSING A LIMITED LIABILITY PARTNERSHIP

THIS IS THE BEGINNING OF YOUR BRAND

Giving your organisation a name and getting it approved is initiation. Once name is approved you can also consider booking a domain name and possibly getting it trademarked sometime in the future

ALL PARTNERS & PLACE OF BUSINESS

Documents pertaining to the identity and address proof of the directors and place of business and mentioned above need to be collected. 

DOCUMENT THAT DEFINES THE ORGANISATION

Due care must be taken to draft this critical document that defines the organisation. Each and every clause in the partnership agreement should be read, discussed and agreed upon. This greatly reduces the potential of conflict in the future.

INCORPORATION

Application is made with all attachment of proof of identity, address, agreement key clauses. If it is in order LLP gets incorporated with CIN number & DPIN number for designated partners

COMPLETING INCORPORATION FORMALITIES

Once the LLP is incorporated two key activities remain to complete the incorporation process.

  1. Apply for PAN and TAN certificate of the LLP. Unlike private limited company this is not automatically allotted.
  2. File Form 3 with the RoC and enclosed the notarised copy of the LLP agreement enclosing pre-incorporation agreements if any.
STATIONERY, BANKING, OTHER CERTIFICATIONS

You need to get stationery and visiting cards done, book your domain and open bank account for the LLP. You may want to register your LLP for  GST, MSME, Shops & Establishments and Professional Tax to complete your compliances. If in the foods business you would want a FSSAI licence, if in the import export business you need an IE Code. If your name and or logo is unique you may want to trademark it and you would be ready to launch

TIMELINE FOR INCORPORATION OF LLP

OUR LLP INCORPORATION PACKAGES

FEATURES OF LIMITED LIABILITY PARTNERSHIP

Separate Legal Entity:       A LLP is a legal entity and a juristic person established under the Act. Therefore, a LLP has wide legal capacity and can own property and also incur debts. However, the Partners of a LLP have no liability to the creditors of a LLP for the debts of the LLP. The partners are distinct from the entity and both can sue each other and get sued in the process.

 Uninterrupted Existence:      A LLP has ‘perpetual succession’, that is continued or uninterrupted existence until it is legally dissolved. A LLP being a separate legal person, is unaffected by the death or other departure of any Partner. Hence, a LLP continues to be in existence irrespective of the changes in ownership. Once a Limited Liability Partnership is incorporated, it will be active and in-existence as long as the annual compliances are met with regularly. In case, annual compliances are not complied with, the LLP will become a Dormant and maybe struck off from the register after a period of time.

 Easy Transferability:     The ownership of a LLP can be easily transferred to another person by inducting them as a Partner of the LLP. LLP is a separate legal entity separate from its Partners, so by changing the Partners, the ownership of the LLP can be changed. All you need is to induct them as a Designated Partner of the LLP. LLP is a separate legal entity separate from its Managing Partners, so by changing the Managing Partners, the ownership of the LLP can be changed.

 Owning Property:      A LLP being an artificial judicial person, can acquire, own, enjoy and sell, property in its name. No Partner can make any claim upon the property of the LLP – so long as the LLP is a going concern.

 Audit & Regulatory:      LLPs are required to file an annual filing with the Registrar each year. However LLPs with a turnover of less than 40 Lakhs and capital contribution of less than 25 Lakh need not get their accounts audited .Therefore, LLPs are ideal for start-ups and small businesses that are just starting their operations and want to have minimal regulatory compliance related formalities.

Designated Partner Identification Number (DPIN):    The concept of a Director Identification Number (DIN) has been introduced for the first time with the insertion of Sections 266A to 266G of Companies (Amendment) Act, 2006. As such, all the existing and intending directors have to obtain DIN within the prescribed time-frame as notified. DIN is a unique identification number allotted to an individual who is an existing director of the company or intends to be appointed as director of a company. DIN is an 8 digit number

It is a unique identification number assigned to all existing and proposed Designated Partner of a LLP. It is mandatory for all present or proposed Designated Partner to have a Designated Partner Identification Number. Designated Partner Identification Number never expires and a person can have only one Designated Partner Identification Number.

DIN or Director Identification Number and DPIN can be used interchangeably. If a person holds both DIN and DPIN, then the DPIN will stand cancelled and the DIN must be used for appointing the person as a Designated Partner of a LLP.

Capital:      You can start a Limited Liability Partnership with any amount of capital. There is no requirement to show proof of capital invested during the incorporation process. Partner’s contribution may consist of both tangible and/or intangible property and any other benefit to the LLP.

Foreign Investment:      Foreign Direct Investment (FDI) is allowed in LLP under the automatic route in sectors allowed by the Foreign Investments Promotion Board (FIPB). However, Foreign Institutional Investors (Flls) and Foreign Venture Capital Investors (FVCIs) will not be permitted to invest in LLPs. LLPs will also not be permitted to avail External Commercial Borrowings (ECBs).

 Conversion from partnership to LLP:      An existing partnership firm or a company that is unlisted can be converted into LLP. There are many advantages of converting a partnership firm into a LLP; however, the same doesn’t apply for the conversion of a Company to a LLP.

Non- Profit:      One of the essential requirements for setting LLP is ‘carrying on a lawful business with a view to profit’. Therefore, LLP cannot be incorporated for undertaking “Not-For-Profit” activities.

A COMPARISON OF ORGANISATION FORMATS

CRITERIAPRIVATE LIMITED COMPANYLIMITED LIABILITY PARTNERSHIPONE PERSON COMPANYPARTNERSHIPPROPRIETOR
Is Registration CompulsoryRequiredRequiredRequiredOptionalNo
Registration under the Act is mandatory to set up Private Limited CompanyRegistration under the Act is mandatory to set up LLPRegistration under the Act is mandatory to set up One Person Company
Both registered and unregistered partnerships are there but registered partnership preferred because of many advantagesRegistration is recommended to get the advantages of operating in a tradename
Is there a law specifically for thisYesYesYesYesNo
The Indian Companies Act 2013Limited Liability Partnership Act, 2008The Indian Companies Act 2013Indian Partnership Act, 1932Not Applicable
What is the minimum and maximum number of members2-20012 – Unlimited2-501
Requires minimum 2 and can have maximum 200 shareholdersMinimum 2 Designated Partners are required No bar on maximum number of partners: all partners need not be designated partnersOnly an individual Indian resident can be the shareholder: however there has to be one nominee alsoIt needs minimum 2 partners and can have maximum 50 partnersOnly one person being the business owner
Is it a separate Legal EntityYesYesYesNoNo
It can buy, hold, sell assets and contract liabilities in its' own nameIt can buy, hold, sell assets and contract liabilities in its' own nameIt can buy, hold, sell assets and contract liabilities in its' own nameIt has no existence which is separate or distinct from its' partnersIt has no identity separate from its' business owner
Do the members have protection from liability - is the liability limitedLimitedLimitedLimitedUnlimitedUnlimited
Liability of members is limited to the value of shares subscribedLiability of members is limited to the value of capital committed by partnersLiability of members is limited to the value of shares subscribedPartners are jointly and severally liable to pay the debts of the Partnership FirmProprietor is liable to pay the debts of the business
How are they taxed ModerrateHighModerateHighLow
Tax rate applicable for small companies is reduced to 22%With tax rate of 30% on business profit, tax benefits to partners is highTax rate applicable for small companies is reduced to 22%With tax rate of 30% on business profit, tax benefits to partners is highTaxed at par with individual
Is Audit mandatoryMandatoryDepends on circumstancesMandatoryDepends on circumstancesDepends on circumstances
Auditor must be appointed within the 30 days of incorporationApplicable when turnover exceeds INR 40 Lakh or contribution exceeds INR 25 LakhAuditor must be appointed within the 30 days of incorporationStatutory audit not applicable. Tax audit may be applicable based on turnoverStatutory audit not applicable. Tax audit may be applicable based on turnover
How are legal compliances and formalitiesHighModerateModerateLowLow
Apart from Annual filings, it has to comply with various provision laid down, but less compared to public companyAnnual filing and few event based filings are necessaryApart from Annual filing, compliances are less compared to Private CompanySeparate ITR of partnership is filed, else there is no filing requirementSeparate ITR of partnership is filed, else there is no filing requirement
Can ownership be easily transferredRestrictedRestrictedOpenRestrictedOpen
Shares can be transferred only with the consent of other ShareholdersOwnership can be changed with consent of other partnersOne member can easily transfer his/her sharesOwnership can be changed with consent of other partnersOwner can easily sell/transfer the business

FAQs ON LIMITED LIABILITY PARTNERSHIP

A private limited company can have a minimum of 2 members and a maximum of 200 members. Members can also be directors in the company
Any individual can be a director provided 1)He/she is at least 18 years old 2) He/she has a DIN (Director Identification Number) or applies for a DIN with the required documents
There are 3 types of private limited companies 1) company limited by shares 2) company limited by guarantee 3) unlimited companies
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