Launching a business can feel like standing at the entrance of a huge, hazy maze, full of opportunities but a tad overwhelming. If you intend to launch your business and wish to have the flexibility of working in partnership with someone (or a few folks) and have limited liability to protect you, then forming a Limited Liability Partnership Registration (LLP) might be the best decision you can make.
This guide explains what an LLP is and highlights why it is a good vehicle for many entrepreneurs, and then shows how to form an LLP in India in a step-by-step manner without the jargon. Let’s get to it.
What is a Limited Liability Partnership?
A Limited Liability Partnership (LLP) can be understood as a middle ground between a partnership firm and a private limited company. It incorporates:
The flexibility of a partnership (less formality, flexibility in management)
With the limited liability of a company (your assets are at risk)
In layman’s terms: if your Limited Liability Partnership ever gets into debt or is in any legal disputes, the most you are liable for is the investment you have made in the LLP, not the value of your car, house, savings, etc.
Limited Liability Partnerships are governed by the Limited Liability Partnership Act, 2008.
Why Should You Pick LLP Above All Other Business Structures?
In India, you have options to start your business as a sole proprietor, as a partnership, as a private limited company, and as an LLP. Why should you choose to form your business as an LLP? Here are the reasons:
✅ Limited Liability: your assets are protected!
✅ Separate Legal Entity: The LLP can sue and be sued, independent of its partners!
✅ No Minimum Capital: You can form an LLP with as little as ₹ 500!
✅ Easy Compliance: an LLP has less compliance burden than a company
✅ Tax: There is no dividend distribution tax like other companies
✅ Unlimited Partners: Minimum of 2 for LLP, no upper limit!
LLPs are ideal for anyone seeking a partnership with others but does not want to risk their wealth in the event the business suffers losses.
Step-By-Step Directions: Registration of LLP in India
Now, let’s take the procedure in smaller steps. Don’t be concerned- it is not as bad as it seems.
1. Acquire a Digital Signature Certificate (DSC)
To start the registration, the designated partners (at least two) must apply for a Digital Signature Certificate. Each document filed with the MCA(Ministry of Corporate Affairs) is filed online, and this would require a digital signature.
Tip: The DSC may usually be obtained from an agency approved by the goverment such as eMudhra or Sify within 1-2 days.
2. Apply for a Director Identification Number (DIN)
The designated partners are required to apply for a Director Identification Number (DIN). You can apply for the DIN while registering the LLP in the Form FiLLiP. If you have received a DIN from the previous company, you would not require an additional DIN.
3. Name Approval – Search and Reservation of LLP Name
At this point- the fun! You need to select a name for your LLP.
Make sure this name is unique, that is, before selecting the name you must check if the name is already taken by any existing business or a trademark already registered. The name has “LLP” at the end of the new name, that is, GreenHive LLP.
4. File the Incorporation Form (Form FiLLiP)
This is your standard form for registration. It will ask you for:
Proposed name of LLP
Details of partners and designated partners
Registered office address
Identity and address proof
DSC and DIN
Subscriber’s sheet
After filing the incorporation and submitting it, you’ll get your Certificate of Incorporation (COI) with your LLP Identification Number (LLPIN). ????
5. File the LLP Agreement (Form 3)
The LLP Agreement has to be submitted to the MCA within 30 days of incorporation. The LLP agreement specifies the roles, rights, duties & profit-sharing ratios of partners.
It has to be signed on stamp paper (amount depending on the state) and all partners have to sign it.
Documents You Will Need
Below is a simple checklist of what to get ready:
For Partners:
PAN card (compulsory)
Aadhaar card / Voter ID / Passport / Driver’s license (as proof of identity)
Bank statement/utility bill (as proof of address)
passport-sized photograph
Registered Office:
A rent agreement or property deed
A NOC from the owner of the property
Utility bill (not more than 2 months old)
Make sure that all documents are legible, up to date, and in PDF format to enable easy upload.
What happens After You Are Registered As An LLP?
After registration, your LLP must:
Open a bank account in its name
Apply for PAN and TAN
Apply for GST if your turnover is over ₹20 lakhs (₹10 lakhs in special states) or if you are engaged in inter-state supply.