It is not mandatory for those who wish to start a business with a partner to form a private limited company. Limited Liability Partnership is the combination of both partnership firm and limited liability. It is a convenient way of doing business, particularly for professionals, consultants, startups and small businesses.
LLP registration in India is done through the Ministry of Corporate Affairs (MCA) under the Limited Liability Partnership Act, 2008. The basic procedure entails getting Digital Signature Certificates, selection and reservation of a good name, filing of incorporation papers on the MCA website and obtaining the Certificate of Incorporation along with drafting of LLP Agreement.
This article elaborates upon the documents, fee charges, eligibility criteria and procedure of LLP registration in India.
What is an LLP?
Limited Liability Partnership is a legal entity where the liability of partners remains limited to their contributions. This form of business entity is a combination of partnership firm and company.
Partnership and designated partners exist in an LLP. Designated partners shall be accountable for certain statutory obligations on the part of the LLP. The LLP will have at least two partners, of which at least two must be designated partners, and at least one of the designated partners must meet the applicable Indian residency requirement.
Unlike a normal partnership firm, the LLP is recognized as a separate legal entity. Hence, the LLP will have the right to hold assets, make agreements and liabilities on its own name.
Incorporation of an LLP, along with other associated filing, will be carried out by the MCA using its online facility. For LLP incorporation, details about the partners, contribution, registered office and business are needed.
Who Can Register LLP in India?
LLP registration may be an appropriate choice for persons or companies who wish to conduct their business in partnership with two or more persons. Individuals such as professional firms, consultants, services, tech companies, trading companies, and emerging startups may use LLP.
The basic criteria for LLP Registration includes:
- Two or more partners.
- Two or more designated partners.
- One or more designated partners satisfying resident-in-India criteria.
- Proposed LLP Name satisfying the applicable name rules.
- The address of the registered office in India.
- Partners agreement about their contribution and duties.
- Identification and address proof of proposed partners.
- Digital Signature Certificate to digitally sign MCA forms of the person required to do so.
Consent and details of the proposed partners will have to be obtained in support of the incorporation process. The instructions for FiLLiP at MCA website provides provisions for subscriber sheets and consent of the proposed partners/designated partners.
Documents Required for LLP Registration
Depending on whether the partners are Indians or foreigners, the document required for LLP registration vary. In case of LLP with Indian partners, the list of documents is simple.
| Document | Purpose |
|---|---|
| PAN card | Identity and tax identification |
| Aadhaar card | Identity and address verification |
| Residential address proof | Verification of the partner’s residential address |
| Passport-size photograph | Partner identification |
| Mobile number and email ID | MCA and compliance communication |
| Registered office proof | Verification of the LLP’s business address |
| Utility bill | Address verification, where applicable |
| NOC from property owner | Evidence that the premises can be used as the registered office |
| Digital Signature Certificate | Digital signing of MCA filings |
| Subscriber sheet | Partner or designated partner consent |
| Details of proposed contribution | Establishes each partner’s agreed contribution |
| LLP Agreement | Defines rights, duties, profit sharing and management |
Additional documents like passport, address documents and notarized or apostilled/legalized documents may be needed in case of foreigners or foreign organizations.
Digital Signature Certificate and DPIN
A Digital Signature Certificate (DSC) is necessary since all the MCA incorporation forms are filed online. Those designated partners who are required to digitally sign the application for incorporation would need the proper DSC.
This implies that one cannot assume that it is mandatory to have a valid DPIN prior to applying for incorporation. The relevant MCA form and filing rules should be referred to at the time of filing.
Registration of LLP in India: Stepwise Procedure
It can be broken down into a number of steps, ranging from getting digital signature to completion of the LLP Agreement.
1. Get Digital Signature Certificate
The proposed partners that will digitally sign the MCA forms will require having a valid Digital Signature Certificate.
This certificate serves to authenticate the electronic documents that are to be submitted on the MCA portal. In most cases, the applicant has to go through an identity verification process by the DSC.
2. Selection of Partners and their Contribution
Before filing for incorporation application, the partners must make decisions concerning:
- Names of the partners and designated partners
- Contribution of each partner
- Profit-sharing ratio
- Business activities
- Rights and responsibilities
- Registered office
- LLP name
Partners’ contributions need to be clearly decided since it is part of incorporation details and ultimately the LLP agreement.
3. Choice of LLP Name
The chosen name must be unique and cannot clash with any company, LLP, trade mark or name that is protected by the relevant laws.
The name reservation process may involve the MCA name reservation process of the LLP including RUN-LLP depending upon the situation.
Name reservation should also be considered as part of the incorporation process when required by the circumstances.
Applicants are advised to check the name availability prior to making any decisions regarding the brand, domain name and marketing material.
4. Submit FiLLiP for Incorporation
FiLLiP is the primary MCA web-form which is used for LLP Name Reservation and Incorporation.
This application will have the following information:
- Name of Proposed LLP
- Address of Registered Office
- List of Partners
- List of Designated Partners
- Contribution
- Business Activity
- Consent of Partners
- Declarations and Documents
Official FiLLiP Instruction Kit of MCA confirms that this web form is being used for Name Reservation, LLP Incorporation, Subscriber Consent and Digital Signature by Designated Partner.
5. MCA Examination and Approval
After receipt of the application along with documents, MCA checks whether the application and documents are meeting the requirements. If yes then the incorporation of the LLP can be approved.
If there is any issue or requirement of information from MCA then the applicant needs to answer the requirement and resubmit the information.
6. Receive Certificate of Incorporation
Once the LLP incorporation gets approval, Certificate of Incorporation will be issued by Registrar of Companies (ROC).
This certificate registers the LLP as a legal entity and provides relevant identification details, including the LLP Identification Details.
By this stage, the LLP has already been registered, but certain compliance measures after incorporation need to be followed.
7. Sign the LLP Agreement
The partners need to prepare the LLP Agreement, which would provide the terms and conditions related to business between the partners.
This usually includes the following:
- Contribution by partners
- Profit-sharing ratio
- Rights and responsibilities of partners
- Liability of designated partners
- Addition of new partners
- Pension and retirement
- Decision making
- Dispute Resolution
- Business Management
- Wind-up
The LLP agreement becomes very important since it sets out the terms of relationship among the partners.
8. Payment of Stamp Duty
The stamp duty on the LLP Agreement is governed by the applicable state laws and therefore may vary from state to state and may depend upon the contribution etc.
This is independent of the central government fees for the registration of MCA.
LLP Registration Fees in India
Total cost involved in the formation of an LLP usually includes the cost of registering with the authorities, stamp duty and professional costs, in case of the involvement of professionals.
| Cost Component | What It Covers |
|---|---|
| DSC charges | Digital Signature Certificates for applicable partners |
| MCA incorporation fee | Government fee for LLP incorporation filing |
| Name reservation fee | Applicable fee where a separate name reservation application is used |
| Stamp Duty | State-specific duty on the LLP Agreement |
| Professional fee | Optional CA, CS, legal or service-provider assistance |
| Additional filing charges | May apply due to delayed or additional filings |
It is important to check the MCA fees applicable at the time of filing as these tend to change often due to changes in government fees or MCA process.
How Long Does It Take to Register an LLP?
Depending on the accuracy of the documents, name availability, MCA process, clarification required and resubmission required, this process can take different amounts of time.
A simple application with accurate documentation will usually take less time than applications where there are name objections, missing documents or wrong information of partners.
LLP vs. Private Limited vs. Partnership Firm
LLP vs Private Limited Company vs Partnership Firm
| Feature | LLP | Private Limited Company | Partnership Firm |
|---|---|---|---|
| Legal identity | Separate legal entity | Separate legal entity | Generally not separate in the same manner |
| Liability | Limited | Limited | Generally unlimited |
| Minimum owners | 2 partners | 2 members | 2 partners |
| Management | Partners/designated partners | Directors | Partners |
| Ownership structure | Partnership interests | Shares | Partnership interests |
| Fundraising | Less suitable for equity investment | More suitable | Limited |
| Compliance | Moderate | Higher | Generally lower |
| MCA registration | Yes | Yes | Not necessarily through MCA |
| Suitable for | Professional firms, SMEs, service businesses | Startups seeking investment and scalable companies | Traditional partnership businesses |
Private Limited Company is preferred if there is a need for external equity and other investments.
Common Errors during LLP Registration Process
Incorporation process could get delayed due to errors in the document. Few of the most common errors include inappropriate name for the business and insufficient information about the partners and registered office.
Applicants should especially be aware of:
Name availability: Verify whether the name suggested by the applicant is already used in companies and LLPs.
Partners’ details: Make sure the details provided are consistent and correct – PAN, Aadhaar, residential address, etc.
Registered office: Make sure the documents provided for proving the registered office address comply with the requirements.
Details regarding contribution: The suggested contribution amount must be agreed upon by partners and stated correctly.
LLP agreement: Never think of LLP agreement as something routine. The LLP agreement must define the commercial relationship between partners.
Annual Compliance: Incorporating an LLP doesn’t mean you will have no annual compliance issues. Form 8, Form 11 and other forms must be filed accordingly.
When Should You Choose an LLP?
The LLP structure may be convenient when at least two persons intend to carry out a business with limited liability protection and flexibility in internal governance.
This type of partnership works effectively in the cases of consultancy firms, professionals’ practice, agencies, services, family businesses and businesses where the owners don’t need capital from outside.
However, an entrepreneur who intends to make large venture capital or angel investment needs to assess a private limited company before opting for it. Likewise, an entrepreneur who wants to conduct his or her business using very basic methods with a partnership will find that a partnership firm will be a better option.
Conclusion
Incorporating a company as an LLP in India gives businessmen the opportunity to set up their business entity under the scheme of Limited Liability Partnership with flexible management. It consists of the selection of a proper name, preparation of partners’ documents and registered office documentation, issuance of DSC, FiLLiP application, Certificate of Incorporation and the LLP Agreement.
Before making the submission, one should check all requirements of the Ministry of Corporate Affairs, fee requirements, and the state Stamp Duty. In addition, professional help from a qualified accountant or a lawyer can be beneficial.
FAQs
At least two partners are required for an LLP. The LLP should also have at least two designated partners in accordance with the LLP Act and other requirements.
Yes. The application for incorporation is submitted online and needs digital signature from the designated partner. This has been specifically addressed in MCA’s FiLLiP guidelines.
FiLLiP is the MCA web form for LLP name reservation and incorporation. It contains information regarding the proposed LLP, partners, designated partners, contribution, registered office, etc.
The LLP Agreement is a vital document which will determine the rights, responsibilities, contribution, and relationship of partners with each other. The document should be duly prepared and executed in accordance with the required legal and stamp duty requirements of the state.
