Overview
A Limited Liability Partnership (LLP) is a unique business setup that combines features of both a partnership and a company. In an LLP, partners enjoy limited liability similar to shareholders in a company, while also benefiting from the flexibility and simplicity of a partnership. This arrangement grants the LLP its own legal identity, allowing it to take legal actions and be subject to legal actions separately from its partners.
LLPs have become popular among entrepreneurs in various industries because they shield partners’ assets and have more straightforward regulatory requirements than traditional corporations. The concept of LLPs was introduced in India in 2008 and is governed by the Limited Liability Partnership Act, offering a dependable and adaptable option for businesses of all sizes.
Limited Liability
Protects partners’ personal assets, as liability is limited to their capital investment.
Flexible Management
Partners can directly manage the business without a board of directors.
Separate Legal Entity
An LLP can own assets, enter contracts, and sue or be sued independently.
No Minimum Capital
LLPs don’t require a minimum capital, making them accessible for low-budget startups.
Lower Compliance Costs
Fewer filings and lower maintenance costs than Private Limited Companies.
Tax Benefits
LLPs don’t require a minimum capital, making them accessible for low-budget startups.
Operational Flexibility
LLP Agreements allow tailored partner roles and profit-sharing structures.
Easy to Dissolve
Exiting or restructuring is simpler, with fewer regulatory demands.
Enhanced Credibility
Registered under the LLP Act, making LLPs more reliable than traditional partnerships.
Features | LLP | |||
Definition | Unregistered type of business entity managed by one single person | A formal agreement between two or more parties to manage and operate a business | A Limited Liability Partnership is a hybrid combination having features similar to a partnership firm and liabilities similar to a company. | Registered type of entity with limited liability to the owners and shareholders |
Ownership | Sole Ownership | - Min 2 Partners - Max 50 Partners | - Minimum 2 Designated Partners | |
Registration Time | 7-9 working days | 7-9 working days | 7-9 working days | 7-9 working days |
Promoter Liability | Unlimited Liability | Unlimited Liability | ||
Documentation | - LLP Deed - Incorporation Certificate | |||
Governance | Under Partnership Act | |||
Transferability | Non Transferable | Transferable if registered under ROF | Transferable | Transferable |
Compliance Requirements | Income tax filing if turnover is more than Rs.2.5 lakhs |
Director & Shareholders Documents | Proof of Registered Office Address |
Passport size colour photo | Proof of Registered Office address should not be older than two months. The utility bill must have the full name and full address. Any one document from below is acceptable : - Electricity Bill - Telephone Bill - GAS Bill - Mobile Bill |
PAN Card (Mandatory) | NOC from the Owner of Premises |
AADHAR card (Mandatory) | |
Proof of Identity (any one of the Below): - Passport - Aadhar Card - Driving License - Voter ID | |
Proof of Address (Any one of the below): Every promoter of the company (Director as well as a shareholder) must submit any one document which is not older than two months as their Residential Address proof : - Bank Statement - Electricity Bill - GAS Bill - Telephone Bill - Mobile Bill |
Frequently Asked Questions (FAQs)
Who is eligible for LLP?
To form an LLP, at least two individuals (called Designated Partners) must be appointed. The individuals must be aged 18 or above and must possess a valid Indian address. Designated Partners can be individuals or bodies corporate (such as companies). Foreign nationals, foreign corporate bodies and limited liability partnerships can also be appointed as Designated Partners.
Is GST required for LLP?
Yes, Goods and Services Tax (GST) is required for all Limited Liability Partnerships (LLPs) depending on the type of services or goods they offer. LLPs are required to obtain a GST registration and file GST returns on a regular basis.
What is DPIN (Designated Partner Identification Number)?
DPIN is a unique identification number assigned to both current and prospective designated partners of a Limited Liability Partnership (LLP). All present or future directors must obtain a DPIN.
Can NRIs/Foreign Nationals be designated partners in an LLP?
An NRI can serve as a designated partner in an LLP, provided they possess a Designated Partner Identification Number (DPIN). However, it’s important to note that at least one designated partner in the LLP must be a resident Indian.
Do LLPs allow Foreign Direct Investment (FDI)?
FDI is allowed under automated route in an LLP by the Foreign Investments Promotion Board (FIPB). Note: Foreign Institutional Investors and Foreign Capital Investors are not allowed to invest in LLPs.
Can we convert a Partnership Firm into an LLP?
An existing partnership firm or a Company that is unlisted can be converted into an LLP. This conversion into an LLP brings in many benefits.