Limited Liability Company (LLP)
Limited Liability Partnership (LLP) was introduced in India by way of the Limited Liability Partnership Act, 2008. The basic principle behind the introduction of Limited Liability Partnership (LLP) is to provide a form of business entity that is simple to maintain while providing limited liability to the owners. LLP is one of the easiest form of business to incorporate and manage in India. With an easy incorporation process and simple compliance formalities, LLP is preferred by Professionals, Micro and Small businesses that are family owned or closely-held. Since, LLPs are not capable of issuing equity shares, LLP should be used for any business that has plans for raising equity funds during its lifecycle.
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LLP Registration : Register will take approximately 15 to 20 days, subject to government and client processing time. Incorporation documents can be submitted to the MCA along with an application for incorporation. MCA will usually approve the application for incorporation of LLP in 10 to 12 days, subject to their processing time.
Name Approval : A minimum of one and a maximum of six names choices must be submitted to the MCA. Subject to availability, naming guidelines and MCA processing time, name approval can be obtained in 5 to 7 working days.
Digital Signature & DIN : Digital Signature Certificate(DSC) and Designated Partner Identification Number(DPIN) is obtained for the proposed Partners of the LLP. DPIN and DSC can be obtained for the proposed Partners within 5 to 7 days.
Benefits :
The main advantage of a Limited Liability Partnership over a traditional partnership firm is that in a LLP, one partner is not responsible or liable for another partner’s misconduct or negligence. A LLP also provides limited liability protection for the owners from the debts of the LLP. Therefore, all partners in a LLP enjoy a form of limited liability protection for each individual’s protection within the partnership, similar to that of the shareholders of a private limited company. However, unlike private limited company shareholder, the partners of a LLP have the right to manage the business directly.
Separate Legal Entity: LLP is a legal entity and a juristic person established under the Act. Therefore, a LLP has wide legal capacity and can own property and also incur debts. However, the Partners of a LLP have no liability to the creditors of a LLP for the debts of the LLP.
Uninterrupted Existence : A LLP has ‘perpetual succession’, that is continued or uninterrupted existence until it is legally dissolved. A LLP being a separate legal person, is unaffected by the death or other departure of any Partner. Hence, a LLP continues to be in existence irrespective of the changes in ownership.
Easy Transferability : The ownership of a LLP can be easily transferred to another person by inducting them as a Partner of the LLP. LLP is a separate legal entity separate from its Partners, so by changing the Partners, the ownership of the LLP can be changed.
Audit NOT Required : A LLP does not require audit if it has less than Rs. 40 lakhs of turnover and less than Rs.25 lakhs of capital contribution. Therefore, LLPs are ideal for startups and small businesses that are just starting their operations and want to have minimal regulatory compliance related formalities.
Owning Property : A LLP being an artificial judicial person, can acquire, own, enjoy and sell, property in its name. No Partner can make any claim upon the property of the LLP.