Accounting
LLP vs Pvt Ltd – Which Business Structure is Right for You?
Introduction Choosing the right business structure is crucial for long-term success. Two of the most popular structures in India are the Limited Liability Partnership (LLP)
Register your LLP in India quickly and effortlessly with submitreturn.com. Trusted by over 6,000 businesses, we specialize in LLP registrations and ongoing compliance. Our expert team of CAs and CSs handles the complete online process seamlessly. Incorporate your LLP in just about 15 business days—efficient, affordable, and fully online.
A Limited Liability Partnership (LLP) is a hybrid business structure that combines the flexibility of a traditional partnership with the benefits of a company. Governed by the LLP Act, 2008, it provides limited liability protection for partners, perpetual legal existence, and simplified compliance requirements. This makes LLPs an ideal choice for service-oriented and professional businesses, including Chartered Accountants, Company Secretaries, Consultants, Recruiters, and similar firms.
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The key advantage of forming a Limited Liability Partnership (LLP) over a traditional Partnership Firm is its status as a separate legal entity. This structure limits each partner’s liability to their agreed capital contribution, safeguarding personal assets from business losses or insolvency. Moreover, partners are protected from the negligence or misconduct of others, ensuring individual accountability within the firm.
The LLP Agreement is a legal document defining the operational framework of a Limited Liability Partnership, specifying the rights, duties, and responsibilities of each partner. Typically, it designates a “Designated Partner” to manage day-to-day business operations. Both individuals and existing entities can become partners in an LLP. The agreement ensures clear role allocation and protects each partner’s interests, particularly in cases where losses arise from another partner’s unlawful actions.
Registering a Limited Liability Partnership (LLP) creates a separate legal entity, independent of its partners. Governed by the LLP Act, 2008, an LLP can own assets, enter into contracts, sue or be sued, and raise capital in its own name. This structure provides operational flexibility and ensures business continuity, even in the event of changes in partners or their demise.
Limited Liability Partnerships (LLPs) have comparatively fewer compliance requirements than Private Limited Companies. Audits are only mandatory if the LLP exceeds specified turnover or capital thresholds. Unlike companies, LLPs are not required to hold board or statutory meetings. Furthermore, compliance-related professional services for LLPs are generally more affordable, making them a cost-effective option for ongoing business management.
PAN card is required for all partners, while foreign nationals may submit a passport as identity proof.
Partners must provide Aadhaar, Voter ID, Passport, or Driving License as identity proof.
All partners must submit recent passport-sized photographs.
Submit a recent electricity or telephone bill as proof of the LLP’s registered office address.
Secure a No Objection Certificate (NOC) from the owner of the registered office premises.
Submit the rent agreement of the registered office, if applicable.
For NRI or foreign partners, all documents must be properly notarized or apostilled, as applicable.
Helps secure name approval and create a distinctive business identity.
Specify your business activity clearly.
The LLP’s registered name must include the mandatory suffix “LLP” or “Limited Liability Partnership
A minimum of two individuals must be appointed as Designated Partners, with at least one being an Indian resident. Additionally, the LLP must have a registered office address in India to complete the registration process.
No minimum capital is required to form an LLP in India. The business can start with any amount of capital as determined by the partners. While there is no minimum limit, each partner must make a financial contribution to establish the LLP. The capital contributions are specified in the LLP Agreement, and the stamp duty is calculated based on the total contribution amount.
There are no citizenship or residency restrictions for becoming a partner in an LLP. The LLP Act, 2008 permits foreign nationals, including foreign companies and LLPs, to incorporate an LLP in India. However, at least one Designated Partner must be an Indian resident. Additionally, each partner must be at least 18 years old to ensure they are legally competent to enter into contracts. The proposed Designated Partner is also required to have a Director Identification Number (DIN).
The Designated Partner Identification Number (DPIN) has been replaced by the Director Identification Number (DIN) for LLP incorporation. DIN is a unique number issued by the MCA to individuals named in the application, enabling them to act as Directors in companies or Designated Partners in LLPs. DIN applications are submitted along with the incorporation application through the FiLLiP form, with a maximum of two DINs allowed per application.
A Digital Signature Certificate (DSC) for LLP is issued as a secure token by authorized Certifying Authorities. All online forms submitted for the incorporation of a Limited Liability Partnership (LLP) in India must be signed using the DSC of a designated partner.
Yes, partners are required to provide a business address in India along with the necessary documents. This address can be either a residential or commercial property. Typically, this address is used by the MCA and other authorities for communication purposes and is published on the official portal.
The LLP Agreement is a contract signed by all partners after the LLP is incorporated in India. It outlines the business terms, including the rights, roles, duties, and responsibilities of the partners. This agreement must be filed within 30 days of receiving the certificate of incorporation. If delayed, a late fee of ₹100 per day will be charged until the agreement is filed.
Yes, a Limited Liability Partnership registered in India can operate multiple businesses, provided they are related or within the same field. Unrelated activities, like Interior Designing and Legal Consultancy, cannot be conducted under the same LLP. All business activities must be clearly stated in the LLP agreement and approved by the Registrar of Companies (RoC).
No, LLPs cannot be formed for “Not-For-Profit” activities. One of the key requirements for establishing an LLP is to carry on a lawful business with the intention of making a profit.
PAN and TAN for the LLP can be applied after the Certificate of Incorporation is issued. The physical PAN card will be sent to the LLP’s registered office once dispatched by the Income Tax Department.
The requirement for a statutory audit in an LLP depends on its turnover and capital contribution. If the LLP’s turnover exceeds ₹40 lakhs or the capital contribution exceeds ₹25 lakhs, its financial statements must be audited by a qualified statutory auditor.
The stamp duty on the LLP Agreement in India is determined based on the capital contribution amount, and rates vary by state. The applicable State Stamp Act depends on the location of the LLP’s registered office. Our package includes ₹500 towards stamp duty. Additionally, notarization of the agreement is not a statutory requirement and is not mandated by the MCA. While banks may sometimes request a notarized agreement, it is not compulsory for LLP incorporation.
After completing online LLP registration, partners should open a bank account in the LLP’s name for business transactions. No further formalities are required, but partners must contribute the agreed capital as needed. Additionally, the LLP must comply with annual filing requirements every year following registration.
After completing online LLP registration, partners should open a bank account in the LLP’s name for business transactions. No further formalities are required, but partners must contribute the agreed capital as needed. Additionally, the LLP must comply with annual filing requirements every year following registration.
Yes, an existing partnership firm or an unlisted company can be converted into an LLP. Converting a partnership firm into an LLP offers several advantages.
Daily business transactions are recorded in the LLP’s Books of Accounts by the accountant(s). These accounts are then verified by an independent auditor to ensure all statutory compliances are met and to provide an audit report.
(Note: submitreturn.com is responsible only for the accounting services it provides but will assist in appointing an independent auditor for your business.)
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