What is LLP?
Before we try and understand the LLP formation procedure in India it is important that we have a clear idea about LLP. What is LLP? The full-form of LLP is the Limited Liability Partnership. It is a newly introduced corporate entity type in India. It is aimed at all small and medium-sized businesses. The good thing about LLP is that it provides many of the benefits that are enjoyed by a Private Limited Company. At the same time with an LLP it is easier to maintain compliance. The good thing about LLP is that it has a low registration fee and easy maintenance and that is the reason LLP has become the first choice of most of the small business owners in India.
How is LLP formed in India?
The process that is followed in LLP formation in India is quite similar to that of the formation of a Private Limited Company. A minimum of two partners are required for LLP formation procedure and it is also important to have a registered office in India. However, one must keep in mind that FDI in LLP is allowed only through prior approval of the Reserve Bank. Hence NRIs and Foreign National Promoters should opt for a Private Limited Company as there 100% FDI is allowed through the automatic route.
Read Also: 7 Advantages of a Private Limited Company
Documents required for LLP formation procedure
- PAN Card of the partners
- Address proof of the partners
- Utility Bill of the proposed Registered Office of the LLP
- No-Objection Certificate from the landlord
- Rental Agreement Copy between the LLP and the landlord
LLP Formation Procedure in India
Step 1: To obtain a digital signature certificate (DSC) of the partners
It is important to get the digital signature certificate of the partners while forming the LLP. It is required to get the DIN or the Director Identification Number or Designated Partner Identification Number. The DSC can be obtained within one day of filing the DSC Application. These digital signatures are valid usually for one or two years and can be used to file tax online.
Step 2: To obtain Director Identification Numbers for the partners
After the digital signature certificate of the partners has been obtained the next step is to apply for the Director Identification Number. The good thing is that DIN happens almost immediately and no extra documents are required. One must be aware of the fact that DIN and DPIN is the same thing and they can be used interchangeably with one another. Besides one should also keep in mind that once the DIN is obtained there is no need to renew it and one person can have only one DIN.
Step 3: To obtain name approval
Once two DIN’s are available the next step is to make an application for the reservation of name. The application is made to the Ministry of Corporate Affairs or MCA. However, it is important that the LLP Promoters keep in mind the LLP naming guidelines and suggest appropriate names so that they can get quick approval from the MCA. After the application for the reservation of name is submitted to the MCA it will be processed by the Registrar of Companies (ROC) in the state. The time required for approval depends on the workload of the ROC.
Step 4: To file for Incorporation
Once the name Approval letter has been accepted by the MCA, LLP Name Approval Letter is issued to the LLP partners. After this, the partners just have 60 days to file the necessary incorporation documents and register the LLP. In case the LLP is not formed within 60 days of the Name Approval, the process of Name Approval will have to be repeated.
If the LLP Registration becomes acceptable, the Registrar would issue an incorporation certificate. Once the incorporation certificate is issued the LLP will be officially registered and they can make PAN application of the LLP. The LLP Partners should keep in mind that the Partnership Deed must be submitted to the MCA within 30 days of incorporation. In case the partners fail to do so a fine will be levied.
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