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LLP formation is govern by the Limited Liability Partnership Act-2008 which came into force on April 1, 2008. The LLP Act, 2008 makes 81 sections and 4 schedules. So far the LLP Rules 2009 have suggested several forms to file with the MCA for a successful LLP agreement.

Characteristics of LLP:

  • It has its own separate legal entity
  • Each partner’s liability is limit to the contribution made by the partner
  • The cost of creating an LLP is low
  • Low compliance and rules
  • Minimum capital contribution is not require

The minimum number of partners in LLP is two. There is no limit on the maximum number of LLP organizations. Among the partners, there should be at least two designate partners who should be individuals, and at least one of them should reside in India. The responsibilities of nominated partners are manage by the LLP agreement. They are directly responsible for complying with all the provisions of the LLP Act 2008 and the provisions specified in the LLP Agreement.

If you want to start your business with a limited liability partnership, you must register it under the Limited Liability Partnership Act, 2008.

Procedure for formation of LLP

Step 1: Certificate of Digital Signature (DSC)

Before starting the registration process, you must apply for the digital signature of the designated partners of the proposed LLP. All the documents for LLP are file through online and need to be digitally sign.

The nominated partner must obtain their valid digital signature certificates from certified agencies recognized by the government. Here is a list of such certified agencies. The cost of obtaining a DSC differs  depending on the certifying agency. Also, you should get DSC Class 3 category or you can click here and let the expert get the DIN for you. If you go for a limited liability partnership company registration with, the plan covers 2 DINs and does not require a separate application for DINs.

Step 2: Director Identification Number (DIN)

You will need to apply for the DIN of all nominated d partners or those who wish to be nominate as partners of the propose LLP.

The application form for allotment of DIN should be made in DIR-3. You must attach a scanned copy of the document to the form. This form must be signed by the Company Secretary in full time employment of the company or by the Managing Director / Director / CEO / CFO of the existing company in which the applicant will be appointed as a director.

Step 3: Name reserve

An LLP-Run (Limited Liability Partnership-Reserved Unique Name) is filed for the reservation of the name of the proposed LLP formation, which will be processed by the Central Registration Centre under Non-STP. But before quoting the name in the form, it is recommended that you use the free name search feature on the MCA portal. The system will provide a list of close similarities to the names of existing companies / LLPs based on the filled search criteria.

This will help you choose names that do not already exist. If the Registrar approves the name only when the name is not undesirable in the opinion of the Central Government and no existing partnership is like a firm or LLP or corporate or trademark.  Form RUN-LLP should be accompanied by a fee as per attachment ‘A’ which may be approved / rejected by the Registrar. Re-submission of the form will be allow within 15 days to rectify the defect. There is a provision to give 2 suggested names of LLP.

Step 4: Incorporate LLP

The form used for the investment is fillip (Form for Limited Liability Partnership) which will be filed with the Registrar who has the jurisdiction of the state in which the registered office fee of the LLP is located. The form will be a unified form.

Fees will be pay as per attachment ‘A ’annexure.

This form also provides for application for DPIN allotment, if the person to be appointed as a designate partner does not have DPIN or DIN.

The application for allot will be made by two persons only.

Reservations can also be apply for through FLLP.

If the name apply for is valid, this valid and reserve name will be fill in as suggested name of LLP

Step 5: File a limited liability partnership agreement

The LLP Agreement governs the mutual rights and duties between the partners and between the LLP and its partners.

The LLP agreement must be submit in the form online in the online form on the MCA portal.

Form for LLP Agreement must be fill out within 10 days of the date of entry.

The LLP agreement will have to be print on stamp paper. The value of stamp paper is different for each state.

Benefits of LLP Formation:

No minimum contribution required

There is no minimum capital requirement in an LLP . LLPs can be form with the least possible capital. Moreover, the partner’s contribution may include tangible, movable or immovable or intangible assets or other benefits of the LLP.

There are no restrictions on business owners

LLPs require a minimum of 2 partners while there is no limit to the maximum number of partners. This is against a private limited company which is prohibit from having more than 200 members.

Low registration costs

The cost of registering an LLP is lower than the cost of incorporating a private limited or public limited company. However, the difference in the cost of registering LLP vs Private Limited Company has decreased in recent days.

Mandatory audit is not require

All companies, whether private or public, regardless of their share capital, are require to have their accounts debit. But in the case of LLP, there is no such compulsory requirement. This is suppose to be a significant compliance benefit. A limited liability partnership in Hyderabad is require to conduct a tax audit debt only if: –

The contribution of LLP formation is Rs. 25 lakh, or

The annual turnover of LLP is Rs. 40 lakhs

Aspects of taxation on LLP

For income tax purposes, the LLP’s partnership is consider equal to the payroll. Thus, the LLP is responsible for the payment of income tax and is not liable for the share tax of its partners in the LLP. Thus no dividend distribution tax is payable. The provision for payment of ‘Deemed Dividend’ under the Income Tax Act does not apply to LLPs

Dividend Distribution Tax (DDT) is not applicable

In the case of a company, if the owners withdraw the profit from the company, an additional tax liability of 15% (plus surcharge and education) in the form of DDT is payable by the company. However, in the case of LLP no such tax is payable and the profit of LLP can be easily withdrawn by the partners.

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