way2registration | Limited Liability Partnership

What is Limited Liability Partnership ?

A Limited Liability Partnership (LLP) in India is a hybrid business structure that combines the benefits of a partnership and a company. It provides the flexibility of a partnership with the limited liability feature of a company, making it an attractive choice for many entrepreneurs and professionals.

Limited Liability Partnership

2 DPIN

2 DSC

Name Approval Application

LLP Partnership Agreement

Incorporation Certificate

PAN

TAN

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COMPARISONS

Features of an LLP

Key Features of a LLP
● Limited Liability: In an LLP, the liability of partners is limited to their contributions to the firm. This means that personal assets of the partners are protected from business liabilities and debts.● Separate Legal Entity: An LLP is a separate legal entity distinct from its partners. It can own property, enter into contracts, and sue or be sued in its own name.● Flexible Management: LLPs offer flexibility in management. Partners can decide how the business is run and how profits are distributed, without the need for a complex corporate structure.● No Minimum Capital Requirement: Unlike a private limited company, an LLP does not have a minimum capital requirement. Partners can start an LLP with any amount of capital they agree upon.
Taxation of LLPs in India
● Tax Rate: LLPs are taxed as separate legal entities. They are subject to a flat tax rate of 30% on their total income. Additionally, a surcharge and health and education cess apply as per current tax laws.● Income Tax Filing: LLPs must file their income tax returns annually using Form ITR-5. They need to maintain proper books of accounts and get them audited if the annual turnover exceeds INR 1 crore.● Goods and Services Tax (GST): If the LLP’s annual turnover exceeds the GST registration threshold (INR 40 lakhs for most states, INR 20 lakhs for special category states), it must obtain GST registration and comply with GST filing requirements.● Tax Deductibility: LLPs can claim deductions on various business expenses such as salaries, rent, utilities, and depreciation. They must ensure all expenses are properly documented and substantiated.
Registration Process for a LLP
● Obtain Digital Signature Certificates (DSC): All designated partners must obtain a digital signature certificate, which is required for filing documents online.● Apply for Director Identification Number (DIN): Each designated partner must obtain a DIN from the Ministry of Corporate Affairs (MCA). This is a unique identification number for individuals intending to become directors in an LLP.● Choose a Name for the LLP: Select a unique name for your LLP and ensure it complies with the naming guidelines provided by the MCA. The name should not be identical to or resemble any existing company or LLP.● Draft the LLP Agreement: Prepare the LLP agreement, which outlines the rights, duties, and obligations of the partners, as well as the profit-sharing ratios and management structure.● File Incorporation Documents: Submit the incorporation documents to the Registrar of Companies (RoC) through the MCA portal. This includes the LLP agreement, DIN, DSC, and other required documents.● Obtain LLP Registration Certificate: Once the RoC processes your application, you will receive a Certificate of Incorporation, confirming the legal existence of your LLP.● Open a Bank Account: Open a bank account in the name of the LLP. The bank will require the LLP’s Certificate of Incorporation, LLP agreement, and PAN card.
Compliances for LLPs
● Annual Filing: LLPs must file an annual return (Form 11) and financial statements (Form 8) with the RoC within specified deadlines. Non-compliance can result in penalties.● Maintain Books of Accounts: LLPs are required to maintain accurate books of accounts and financial records. These should be audited annually if the turnover exceeds INR 1 crore.● File Income Tax Returns: LLPs must file their income tax returns annually. They should also ensure timely payment of advance tax, if applicable.● Compliance with GST: If registered for GST, LLPs must file GST returns periodically and adhere to GST compliance requirements, including maintaining records of all sales and purchases.● Update Information: LLPs must update their information with the RoC if there are any changes in the partnership, address, or other significant details.
Is a LLP Right for You?
An LLP is an ideal choice for businesses looking for a flexible management structure combined with limited liability protection. It suits professional firms, startups, and small to medium-sized enterprises seeking to enjoy the benefits of a partnership while mitigating personal risk.
Before setting up an LLP, it is advisable to consult with legal and financial professionals to ensure compliance with all regulations and to tailor the LLP structure to your specific business needs.
By understanding the fundamentals of an LLP, including taxation, registration, and ongoing compliance, you can make informed decisions and build a solid foundation for your business in India.

LIMITED LIABILITY PARTNERSHIP

COMPARISONS

Features of an LLP

Registration Process for a LLP

Compliances for LLPs

Is a LLP Right for You?

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