FAQs - Limited Liability Partnership (LLP) Registration in India

At present, the Limited Liability Partnership (LLP) companies are among the hugely popular companies in India also, especially in the service sector. The LLPs are prominent for offering the benefits of a partnership firm and a duly incorporated limited (liability) company. These LLPs offer certain exclusive advantages over other types of companies, in respect of the ease of formation, business management, taxation and other regulatory compliances, the maximum permissible number of partners, etc. Hence, these limited liability partnership companies have also been established by our famous law firm of India in a large number during past years. The following frequently asked questions (FAQs) related with a limited liability partnership (LLP) registration in india, offer more highly informative and useful pieces of information, to help Indian and global people and companies.

What is LLP and What are the features of an LLP in India?

The Limited Liability Partnership (LLP) is a company/firm which offers the benefits of both the partnership firms and the incorporated limited liability companies. In India, these LLPs are registered and regulated as per the LLP Act of 2008, and the LLP Rules of 2009. As in other countries of the world, LLPs are rather popular in the sector of services in India also. In general, the following are salient features of LLPs in India:

• An LLP offers the facilities/qualities of being a separate legal entity different from that of its partners, perpetuity, and limited liability to its partners.
• The LLP Act of 2008, gives the partners of an LLP the liberty to manage its own affairs as per their will and fancies, specified in the LLP Agreement.
• Only two partners are needed at a minimum for form an LLP in India; there being no limit to the maximum permissible number of partners. In case of a private limited company, this maximum limit is 200 (extended from 50 by the new Indian Companies Act of 2013). A foreign national/entity or NRI can be a partner to an LLP in India.
• No minimum capital is prescribed for registering an LLP in India; nor are recommended the minimum amounts of contribution by the partners.
• An LLP located in India can receive FDI from a foreign investor or company.
• An LLP has lesser compliance burden than that of a private limited company.
• LLPs are taxed at a lower rate as compared to the private and public limited companies. Again, no Dividend Distribution Tax (DDT) applies to LLPs in India.
• Other features of an LLP in India are stipulated in the paragraphs below.

What are the requirements for incorporation of an LLP in India?

• A minimum of Two Partners; there being no limit to the maximum number of partners.
• A minimum of Two Designated Partners, of whom one must be a resident of India. Again, the partners and the designated partners can be the same persons.
• DPIN for all Partners
• DSC for One of the Designated Partners
• And, necessary documents related with the partners and the LLP.

• User Registration with the website: www.llp.gov.in
• Obtaining DSCs and DPINs
• Getting approval and reservation of any proposed Name through Form-1
• Filing Form-2 for LLP Incorporation, together with the prescribed fees given in the LLP Rules of 2009.
• Filing Form-3 (related with LLP Agreement) and Form-4 (related with the appointments, consents of the partners and designated partners).
• Lastly, getting the Certificate of LLP Incorporation in Form-16.

Are there any Annual Returns required to be filed by an LLP? If Yes, then explore?

An LLP of India is required to file only two regulatory compliances every year. Namely, the Statement of Accounts & Solvency in Form-8, and the Annual Return in Form-11. Again, there is no mandatory requirement of compulsory audit of accounts by a qualified Chartered Accountant in case of an LLP in India, except the following two cases

1. When the contributions of the LLP exceed INR 25 Lac, or
2. When its annual turnover crosses INR 40 Lac

What are the benefits of formation of a company as LLP?

In general, many entrepreneurs prefer to set up an LLP rather than a private limited company. The advantages of an LLP over a private limited company, or the exclusive benefits offered by an LLP in India, are the following:

• An LLP has no limit to the maximum number of partners. In case of a private limited company, the maximum number of the shareholders has been kept at 200.
• The cost of incorporation of an LLP is lower than that for incorporation of a private or public limited company.
• Organization of the internal structure, and management of the business affairs of an LLP are easier and more flexible.
• An LLP has lower compliance burden, as compared to a private or public limited company. There are about 8 to 10 regulatory compliances to be made by a private limited company, every year. But an LLP has to file only two mandatory compliances every year, which are the Statement of Accounts & Solvency (in Form-8) and the Annual Return (in Form-11). Again, in case of an LLP, there is no mandatory requirement of getting the accounts audited by a qualified Chartered Accountant, in normal cases; the special cases are mentioned above, when it is to be necessarily done. It must be noted that, this audit of accounts is compulsory in cases of a private or public limited companies, irrespective of the share capital of those.
• The Dividend Distribution Tax (DDT) is not applicable to LLPs in India.

What are the Tax Policies for an LLP?

For the purpose of taxation, LLPs are treated like Partnership Firms. The Minimum Alternate Tax and DDT are not applied to LLPs in India. A private limited or public limited company, is subject to DDT @ 15% (plus Surcharge and Education Cess). The taxes applicable to an LLP in India, are the following:

• Income Tax: 30%. In case, when the income of the LLP exceeds INR One Crore in any financial year, then Surcharge @ 10% will be applied.
• Education Cess: 3%.

Is FDI allowed in LLP? If yes, then who can invest in LLP as FDI?

The recent FDI norms and policies of the Government of India, especially those which were announced in November 2015, allow NRIs and Foreign Nationals/Investors for making FDI up to 100% in Indian LLPs through Automatic Route into some specified economic sectors. Some provisions have also been made effective for easy, fast, and smooth set-up and management of LLPs by NRIs and Foreign Investors, particularly when the annual sales turnover is less than INR 40 Lac, or when the contributed capital is less than INR 25 Lac.

To harness our fast and expert legal services for registering an LLP or any other company anywhere in entire India, Indian or foreign investors may readily call over: 8800-100-284; or send their respective queries or mails to: info@GlobalJurix.com .