Limited Liability Partnership (LLP) Formation in India – A Complete Guide

Introduction:

A Limited Liability Partnership (LLP) is a hybrid business structure that combines the flexibility of a traditional partnership with the benefits of limited liability similar to a company. Governed by the Limited Liability Partnership Act, 2008, LLPs are ideal for professional firms, SMEs, startups, and businesses seeking operational flexibility while limiting personal liability.

LLPs are particularly attractive for businesses where partners want a simple management structure but also want protection from personal liability for business debts.

Eligibility & Requirements:

Partners: Minimum 2 partners are required.

Designated Partners: At least 2 designated partners, one must be an Indian resident.

DPIN / DIN: Designated Partner Identification Number is mandatory for all designated partners.

DSC (Digital Signature Certificate): Required for signing e-forms with MCA.

Registered Office: Must have a valid physical address in India.

Foreign Investment: Allowed under FDI policy; compliance with FEMA is required.

Step-by-Step Formation Process:

1. Obtain DSC & DPIN:
   1. Class 3 DSC is mandatory for all designated partners.
   1. Apply for DPIN for partners who do not have DIN or DPIN yet.
2. Name Reservation:
   1. File RUN-LLP (Reserve Unique Name) for approval of the LLP name.
   1. Ensure the name complies with LLP naming guidelines.
3. Draft LLP Agreement:
   1. Prepare the LLP Agreement specifying:
      1. Roles and responsibilities of partners
      1. Profit-sharing ratios
      1. Management rules and decision-making processes

• Filing Incorporation Forms with MCA:
  • Submit Form FiLLiP (Form for Incorporation of LLP) with:
    • Approved name
    • DSCs and consent of designated partners
    • Registered office details
  • Pay applicable government fees and stamp duty.
• Certificate of Incorporation (CoI):
  • MCA issues LLPIN and CoI on approval.
  • LLP becomes a separate legal entity from the date of issuance.
• Registration of LLP Agreement:
  • File the LLP Agreement with MCA within 30 days of incorporation.
  • Stamp duty is payable as per the state regulations.

Post-Incorporation Compliance:

• Maintain statutory registers as required by the LLP Act.
• Conduct annual partner meetings (optional but recommended).
• File Annual Return (Form 11) and Statement of Account & Solvency (Form 8).
• Appoint an auditor if turnover exceeds prescribed limits.
• Comply with GST, TDS, and other applicable tax laws.

Tax & Legal Considerations:

• LLPs are taxed as partnership firms under the Income Tax Act.
• Profit sharing among partners is tax-exempt in their hands.
• GST registration may be required depending on turnover.
• Maintain FDI compliance if foreign partners are involved.

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