Setting up a Limited Liability Partnership (LLP) in India : A comprehensive guide

Frequently Asked Questions

Q. What is an Limited Liability Partnership (LLP)?

A Limited Liability Partnership (LLP) is a partnership in which some or all partners have limited liabilities. It therefore can exhibit elements of a partnership firm and a private limited company, where the business is carried out in a corporate framework, guided by terms of the mutually adopted partnership deed. In an LLP, a partner is not responsible or liable for another partner's misconduct or negligence. The Limited Liability Partnership (LLP) partnership was introduced in India by way of Limited Liability Partnership Act, 2008 and has become a preferable form of organization among entrepreneurs as it combines the benefits of both partnership firm and a company into a single form of organization.

‍Q. What are the essential features of an LLP?

1. Separate Legal Entity: A Limited Liability Partnership is legally recognized as a separate entity. Hence, an LLP can have its PAN, bank accounts, licenses, approvals, contracts, assets and liabilities in its unique name.
2. Limited Liability: Partners of a Limited Liability Partnership have liability limited to the extent of their contribution in the LLP and personal assets of partners cannot be utilized for the payment of the liabilities of the LLP under any circumstances.
3. Lesser Compliance: Tax compliances are similar for both private limited company and LLP. However, when it comes to compliance relating to the Ministry of Corporate Affairs, LLP enjoys significant advantages. An LLP does not have to get its accounts audited if the annual turnover of the LLP is less than Rs. 40 lakhs and the capital contribution is less than Rs. 25 lakhs. A private limited company on the other hand would have to file audited financial statements every year irrespective of its turnover.
4. Simplicity: The Process of forming the LLP and maintain it is very simple as compared to private limited company.

Q. How do I start an LLP?

A Limited Liability Partnership can be incorporated by submitting relevant information on the website of the Ministry of Corporate Affairs. In order to start an LLP, you must meet the minimum requirements as listed below:

1. Designated Partners: A Limited Liability Partnership must have a minimum of 2 Designated Partners and a maximum of 200. The pre-requisite is to have at least 2 Designated Partner who is a resident of India. The partners should be above the age of 18 years. This is to ensure that the partner in the LLP is not a minor and is competent to enter into a contract.
2. Digital Signature Certificate: DSC is mandatory for all the partners. Any form filed for incorporation of a Limited Liability Partnership (LLP) in India online shall be submitted after affixing the DSC of the designated partner.

Q. Is there any minimum capital requirement for an LLP registration in India?

No. There is no minimum amount of capital prescribed to form an LLP in India and therefore an LLP can be incorporated with any amount of capital. Although there is no minimum requirement, every partner must contribute financially to form the LLP. The amount of capital contribution is disclosed in the LLP Agreement and amount of stamp duty payable depends on the total contributed amount.

‍Q. What is minimum number of partners required to start an LLP?

To incorporate a Limited Liability Partnership, a minimum of 2 people is required. A Limited Liability Partnership must have a minimum of 2 Designated Partners and a maximum of 200.

‍Q. What documents are required to setup an LLP in India?

• Copy of PAN Card of Designated partners
• Passport size photograph of Designated partners
• Copy of Aadhaar Card/ Voter identity card/ Driver’s license as address proof
• Electricity/ Water bill/ Telephone Bill as proof of Registered Office (Business Place)
• Copy of Sale Deed/Property Deed (If owned property)
• Passport (in case of Foreign Nationals/ NRIs)
• Digital Signature Certificate
• Copy of Notarized Rental Agreement
• Copy of NOC from the property owner

Q. How to reserve the name for an LLP?

LLP name availability is as an essential part for an online LLP registration. The name of an LLP is reserved through a web-based form named “LLP-RUN” (Reserve Unique Name). The partners can provide maximum of 2 names in preferential order to reserve the name. The registrar may ask to re-submit the application with different names, if the proposed names do not fall under criteria of uniqueness, relevancy or does not fulfil the necessary requirements.

‍Q. What is the process of getting an LLP Registered?‍

Step-1: Acquire Digital Signature Certificate for Partners:

The first and foremost step to register a Limited Liability Partnership is to acquire a Digital Signature Certificate (DSC) of the partners. Any e-form is filed with the Ministry after affixing the DSC of the authorized signatory for LLP Incorporation. Also, it is required for the application of DIN of the partners.

‍Step 2: Name approval Application:‍

The next step in LLP registration involves making an application for reservation of name of the proposed LLP. The application is to be made in “RUN-LLP”, where one can apply for maximum 2 names in order of the preference. One shall keep in mind that the names applied are not identical or nearly resembling any existing Company or LLP or registered trademark.  If the proposed names are not approved by the MCA, a resubmission is allowed with 2 more proposed names. Once the name is approved, it is reserved for a period of 3 months from the date of approval.

‍Step 3: Application for Certificate of Incorporation:‍

The FiLLiP (Form for incorporation of Limited Liability Partnership) form, used for LLP incorporation, must be filed with the relevant Registrar based on the LLP's registered office location. This integrated form combines DIN Allotment Application with the incorporation request. It allows DPIN/DIN application for up to 2 Designated Partners (DPs). Additional DPs without DIN can be added later through "Form-4". The form also facilitates name reservation, either through LLP-RUN or within this application, as per the applicants' preference.

Alongside the form, necessary documents like subscriber’s sheet and office address proof are submitted. Partners attest the e-form via PAN-based DSC, certified by a practicing professional (CA/CS/CWA). The Central Registration Centre (CRC) reviews the application. If further documents are needed, the registrar may request resubmission. After approval, the Certificate of Incorporation (CoI) in form 16, containing DPIN/DIN and LLPIN, is issued. The CoI's date marks the legal inception of the LLP, enabling the commencement of business activities.

‍Step 4: Apply for PAN and TAN‍

Unlike in the case of company, the application for PAN and TAN is required to be made separately for LLP through offline or online mode. The applications are made directly to the Income Tax Department. The applications are made in form 49A and 49B respectively with Certificate of Incorporation as supporting proof.

‍Step 5: Drafting and Filing LLP Agreement‍

The next step will be to draft LLP Agreement carefully and based on the partners’ requirements. Step 4 and Step 5 both can be processed simultaneously, however, this step would take a little longer to complete than simply making the application. The name, business object, place of business and all other essential details of LLP will be placed in the Agreement. Other clauses will be capital contribution, profit sharing ratio, rights and responsibilities of partners, etc.

Once the LLP Agreement is reviewed and agreed upon by the partners, it will be executed by payment of stamp duty. which depends on the respective State Stamp Act where the registered office of the LLP is situated. Lastly, with the signatures by the partners and attestation by the witnesses, the agreement will be executed.

This is filed in LLP form-3 and the verification and approval are processed by the concerned State RoC instead of Central Registration Centre (CRC) as in the case of previous steps. The agreement must be filed with MCA within 30 days of the date of incorporation. Any delay leads to a penalty of RS 100 per day till the date of actual filing.

Q. What is a Digital Signature Certificate (DSC)?

Digital Signature Certificate for LLP is provided in the form of a token and issued by Certified Authorities. Any form filed for incorporation of Limited Liability Partnership (LLP) in India online shall be submitted after affixing the DSC of the designated partner.

Q. What is a Designated Partner Identification Number (DPIN)? 

The concept of Designated Partner Identification Number (DPIN) for LLP incorporation is the same as Director Identification Number (DIN) with respect to the Company incorporation. Director Identification Number is a unique number assigned by the MCA to Individuals on whose behalf the application is made. This allows any individual to be Director in any Company or Designated Partner in LLP. The application of DIN allotment is made with incorporation application in FiLLiP subject to maximum 2 DINs.

Q. What are the requirements to be a Partner/Designated partner for LLP formation?

There are no limitations in terms of citizenship or residential status to be a Partner in LLP. In other words, the LLP Act, 2008 allows foreign nationals, including foreign companies & LLPs to incorporate an LLP in India. The pre-requisite is to have at least one Designated Partner who is a resident of India who is above the age of 18 years. This is to ensure that the concerned person is not a minor and competent enough to enter a contract. Also, the proposed Designated Partner shall have DPIN.

Q. Can a salaried working person also become a partner in an LLP?

Yes, a salaried person can become a partner in an LLP. You need to check your employment agreement if that allows for such provisions. In most cases, employers are comfortable with the fact that their employee is a director or partner in another company or LLP.

Q. Can NRI/ Foreign Nationals be a designated partner in LLP?

Yes, an NRI or Foreign National can be a Designated Partner in a Limited Liability Partnership after obtaining Designated Partner Identification Number (DPIN). However, at least 1 Designated Partner in the LLP must be a Resident India. In fact, the foreign director can also be a majority shareholder in the company 

Q. Does LLP have a separate legal entity?

Yes, LLP has a separate legal entity, liable to the full extent for its assets. In other words, liability of the partners is limited to their agreed contribution in the LLP. Further, no partner would be liable on account of the independent or unauthorized actions of other partners, thus allowing individual partners to be shielded from joint liability created by another partner’s wrongful business decisions or misconduct.

Q. Is an office address required for starting an LLP?

Yes, the partners must provide a place of business in India with the required list of documents. It can be both – a residential and commercial plot. In most cases, the address is used for the communication purpose by the MCA and other concerned authorities and is also published on its portal.

Q. Can we Change office address of LLP after incorporation?

Yes, the LLP office address can be changed at any time after incorporation by filling the form “Form-15” to ROC.

Q. What is LLP Agreement? Is it required to be filed with MCA?

LLP Agreement is an agreement executed by all partners after LLP incorporation in India. The agreement prescribes all the clauses related to business, including the rights, roles, duties, and responsibilities of partners in LLP. The agreement must be filed in “Form -3” to ROC within 30 days of the issue of a certificate of incorporation. Failure to do so will charge an additional fee of ₹ 100 per day till the date of filing.

Q. How is the Stamp duty amount computed with respect to an LLP Agreement? Whether notarization is necessary?

The amount of capital contribution is taken into consideration in deciding the stamp duty on the LLP Agreement in India. The rate of stamp duty varies from State to State. The State Stamp Act will be applied depending on where the registered office is situated. The amount of Rs 500 is included in the package cost of Inrole. Further, the agreement must be on stamp paper and be notarized.

Q. Do I have to physically visit ROC office during registration of LLP?

No, none of the partners are required to be present. All the forms are filed on the web portal and are digitally signed. The required documents can be uploaded on your Inrole dashboard and the dedicated expert initiates the process upon receipt.

Q. When can I get the PAN and TAN of the LLP?

PAN and TAN is must for every LLP as LLP is required to file its Income Tax Return and TDS return and is also required to quote the PAN for various transitions as prescribed under Income Tax Act and Rules. Unlike Companies where SPICe + form for incorporation has facility to get PAN and TAN along with Certificate of Incorporation, LLP Form FiLLiP (Form for incorporation of Limited Liability Partnership) does not have such facility right now, so PAN and TAN application is required to be made separately as soon as LLP gets incorporated.. The physical copy of the PAN will be received at the Registered Office once the same is dispatched by the Income Tax Department.

Q. How long will it take to incorporate an LLP?

Inrole can incorporate a Limited Liability Partnership in 14-20 days . The time taken for incorporation will depend on submission of relevant documents by the client and speed of Government Approvals. To ensure speedy incorporation, please choose a unique name for your LLP and ensure you have all the required documents prior to starting the incorporation process.

Q. What are the annual compliance requirements once LLP is registered?

Once LLP registration completes, the partners must open a bank account in the name of LLP for business transactions. There is no additional requirement to be fulfilled. However, the partners must deposit the agreed amount to contribute as and when required. Subsequently it shall file form “Form -8” and “form-11” as part of Annual compliance within the given timeline.

Q. Whether Audit is mandatory after LLP registration in India?

Statutory audit in case of LLP registration depends on the turnover and contribution of the LLP. If the LLP turnover exceeds ₹ 40 lakhs and/or the capital contribution exceeds ₹ 25 lakhs, the financial statements must be audited by an eligible statutory auditor.

Q. Can an LLP convert into Private limited Company?

Yes, you can convert your LLP into a Private Limited Company. LLP can be converted into a Private limited company by following the provisions contained in Sections 366 to 374 Part XXI of the Companies Act,2013 and Companies (Authorised to Register) Rules, 2014.

Q. Can an existing partnership firm be converted to an LLP?

Yes, an existing partnership firm can be converted into LLP by complying with the Provisions of clause 58 and Schedule II of the LLP Act. “Form 17” needs to be filed along with “Form FiLLiP” for such conversion and incorporation of LLP.

Q. What is the income tax rate applicable to an LLP? Does the Income Tax Act treat partnership firms and LLPs differently?

• Both general partnerships and LLPs are taxed at flat rate of 30%.
• All the other income tax act provisions apply similarly except that general partnership firms are covered under presumptive taxation scheme i.e. if turnover is below Rs. 2 crores in business or Rs. 50 lakhs in case of profession, there is no need to maintain books of accounts or get accounts audited whereas, LLPs are not covered under presumptive taxation scheme.

Q. How can Inrole help? What is the cost incurred to get an LLP?

Inrole is an online financial services platform backed by a team of in-house professionals to facilitate business registrations in India starting at Rs.6,000 +18% GST. We create real value by assigning a dedicated expert to handhold you through the process of LLP incorporation from scratch and also assist with managing the business operations i.e. finance, accounting, tax, legal, secretarial and payroll compliances post incorporation.