How to Register a LLP in India
If you are a part of an LLP, or Limited Liability Partnership, you have to know what it takes to make sure that LLP registration for your business becomes legal.
Considered to be an innovative concept in the industry, LLPs came into existence on January 9, 2009, after the Official Gazette of India established the Limited Liability Partnership (LLP) Act. This was the benchmark of making sure that LLP registration for partnerships would be legal.
LLP registration was then tested when the first LLP was registered in April 2009. A couple of sections have then been added to the first mandate to make it better.
A Background on LLPs
So, how can you be sure that your business is considered an LLP, then?
For starters, LLPs are partnerships that do not give unlimited liability to its members, compared to traditional corporations, and businesses. What sets LLPs in India apart is the fact that LLPs do not need to have at least one mandatory member who would shoulder unlimited responsibility. Therefore, the liability would then lie on the kind of capital that has been invested for the current business.
Another thing you can keep in mind is that LLP members would be able to have high level of protection, and only limited liability when it comes to financial risks regarding the business.
So, maybe, you are thinking that it sounds so informal, right? Why would it need LLP registration, you may ask. But the thing is, apart from what has been mentioned, LLPs still work almost the same way as normal businesses, but should be able to have the following outstanding features:
- The name of the company should have Limited Liability Partnership or LLP at the end of its name.
- It should make way for perpetual succession, and should have separate legal status from its partners.
- There should at least be 2 partners in the firm, to make way for proper LLP registration. One of the partners should also be a legal resident of India.
- The LLP should work like a mix of a partnership business, and a corporate entity.
- Partners may not always be the same because the LLP is considered as a separate legal entity.
- Rights and liabilities of partners will be determined based on LLP Act Schedule I, which means that both partners are entitled to equally share the capital of the business, and respect of the payments should be known by both, even in the absence of one. This also means that both of the partners should have equal rights in managing the business, and both are not entitled when it comes to the remuneration of acting for the business.
- No one could be introduced as partner for the firm when all the other partners have not given their consent.
- No minimum capital requirements are required for the company, so none of the partners are expected to bring capital, except for when partners have already agreed upon it.
- LLP does not require compulsory audits to be done. But, if the total capital of certain LLPs exceed Rs 25 Lakhs, it would be better to get auditing done. Same goes for when annual turnover is determined to be over Rs 40 Lakhs.
- There are no maximum amount of members given for LLPs, but of course, two partners should be around as it is supposed to be a “partnership”.
In short, you would be able to manage a business that gives you more freedom than liability—while still being responsible for it!