Recently developed corporate form in India, that is Limited Liability Partnership, is geared towards small and medium-sized firms. Many of the advantages of a Private Limited Company are also offered by an LLP. Many Indian small firms choose LLP as their first choice due to its low registration cost and simple maintenance requirements. This article examines the LLP Formation Procedure and the other related things with respect to LLP. 

Formation of an LLP

The LLP Formation Process is quite similar to the process for forming a Private Limited Company. To begin the LLP Formation Process, a minimum of two Partners are needed, and the location of the registered office must be India. It is crucial to keep in mind that FDI in LLP is only permitted with the Reserve Bank of India’s prior approval (RBI). Therefore, it is advised, that founders who are NRIs choose to form a Private Limited Company, where 100% FDI is permitted via the automatic method instead of LLP formation as LLP Formation Process is little bit complicated with respect to the NRIs. 

Requirements for LLP Formation Process 

Following are the basic requirements for LLP incorporation- 

• At least two partners (Individual or body corporate).
• There should be a minimum of two approved partners who are persons, and one of them must reside in India.
• Certificate for a digital signature 
• Licensed office

Characteristics of LLP

The characteristics of a Limited Liability Partnership are given below- 

• One of the most important features of an LLP is that it exists independently as a separate legal entity.
• In an LLP agreement, members take advantage of the organizational flexibility of a partnership.
• LLP agreement is a private document 
• An LLP can be formed only by two “designated” members.
• An LLP’s “trading disclosure” is comparable to a company’s.
• LLPs have same accounting and filing regulations as corporations.
• Each LLP member pay taxes on their respective share of income and gains.
• Like a firm, an LLP may issue debentures with fixed or variable interest rates.
• Last but not least, members of an LLP benefit from limited liability

Documents Required For LLP Formation Process 

To begin the LLP Formation Process, the partners’ PAN cards and address verification are needed. After receiving name permission for the LLP from the Registrar of Companies, the paperwork relevant to the Registered Office of the LLP can be filed. The following papers must be submitted in order to register an LLP in India-

• The Partners’ PAN Cards
• Proof of the Partners’ Address
• Utility Bill for the LLP’s intended Registered Office
• Landlord’s No-Objection Certificate
• Copy of the lease between the landlord and the LLP

LLP Formation Procedure 

Follow the steps given below for LLP Formation Procedure- 

1. Obtain the Partners’ Digital Signature Certificate (DSC).

A Digital Signature Certificate (DSC) is necessary to obtain a DIN (Director Identification Number) for the LLP’s Partners. As a result, a Digital Signature Certificate must be obtained by the prospective Partner. In general, digital signatures are valid for one or two years, during which, they can be used to file income tax documents and Ministry of Corporate Affairs (MCA) paperwork.

2. Getting the Partners’ Director Identification Numbers

Once the Partners have digital signatures, a Director Identification Number (DIN) application can be submitted. Ordinarily, DIN registration takes place easily, but in a few unusual instances, the DIN cell may require extra documentation before the DIN application may be approved.  Additionally, once a DIN is obtained, it cannot be renewed and each person is only allowed to have one DIN.

3. Obtaining Name Approval 

Once there are DINs available, the MCA can be contacted to request a name reservation. To guarantee quick approval, it is crucial that the founders keep in mind the LLP naming guidelines which offer suitable names for the LLP. The Registrar of Companies (ROC) in the State of Incorporation will process the application after it is submitted to the MCA for name reservation. Depending on the workload, the processing period for name approval applications varies from ROC to ROC.

4.  Incorporation Application

An LLP name permission letter will be given to the proposed partners once the name approval application has been approved by the MCA^[1]. After that, the Partners have 60 days to register the LLP and complete the necessary documentation for incorporation. If the LLP is not filed within 60 days of receiving the name approval letter, the name must be obtained again.

The records proving ownership of the registered office must be submitted when the LLP is being formed. Once ready, the registered office-related paperwork and the signed subscribers’ sheet must be sent to the MCA for the LLP’s registration. The Registrar would issue the incorporation certificate if the application for LLP Registration was approved. The LLP will be regarded as registered after the incorporation certificate is issued, at which point a PAN application can be made. The LLP’s Partners then have 30 days to file the LLP’s Partnership Deed with the MCA. A fine will be imposed if the LLP Partnership Deed is not filed within 30 days.

Conclusion

It goes without saying that an LLP Formation Process is an effective way to do business with the least amount of risk. A Limited Liability Partnership is also the least expensive and most secure sort of business, as its name suggests. A business aspirant should use an LLP to enter the cutthroat corporate market. LLP Formation Process seems very easy but there are a lot of formalities included while taking or forming such businesses. Hence expert advice is suggested. You can also get in touch with Bizadvisors.io if you need any support with the LLP Formation Process.

Read our article:LLP Registration: A Complete Guide