Limited Liability Partnership (LLP)
A Limited Liability Partnership (LLP) is a type of business structure in India that combines the features of a partnership firm and a limited liability company. In an LLP, the partners have limited liability for the debts and obligations of the partnership, meaning that their personal assets are protected in the event of business failure or insolvency.
The Limited Liability Partnership Act, 2008 governs the formation and operation of LLPs in India. Some of the key features of LLPs in India include:
Separate Legal Entity: An LLP is a separate legal entity from its partners, meaning that it can enter into contracts, sue or be sued, and own property in its own name.
Liability of Partners: The liability of the partners in an LLP is limited to their agreed contribution to the partnership, meaning that their personal assets are not at risk in the event of business failure or insolvency.
Flexibility: LLPs offer greater flexibility in terms of management and decision-making compared to traditional partnership firms, as the partners have more autonomy in running the business.
Easy to Form: LLPs are relatively easy to form, as they have fewer legal requirements compared to other types of business structures in India.
Taxation: LLPs in India are taxed as partnerships, with the profits being taxed at the partner level, rather than at the company level.
To form an LLP in India, the following steps must be taken:
Choose the name of the LLP: The name of the LLP must be unique and cannot be similar to any existing company or LLP.
Obtain a Digital Signature Certificate (DSC) and a Director Identification Number (DIN) for each partner: DSCs and DINs are mandatory for partners to be able to sign and file the incorporation documents electronically.
File the Incorporation Documents: The incorporation documents, including the LLP Agreement and the Form 2 (Incorporation Document), must be filed with the Registrar of Companies (RoC) in the jurisdiction where the LLP will be located.
Obtain the LLP Identification Number (LLPIN): The RoC will issue an LLPIN after the incorporation documents have been approved and processed.
Register for Goods and Services Tax (GST): LLPs are required to register for GST in India, if their turnover exceeds the threshold limit.
Overall, the Limited Liability Partnership structure is an attractive option for businesses in India due to its combination of the benefits of a partnership and limited liability, as well as its relative ease of formation and flexibility. It is advisable to seek the assistance of a qualified legal professional when forming an LLP in India.