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Limited Liability Partnership 

by orbinside

Career and Investment Planning

Entrepreneur Journey

We will be explaining about the Limited Liability Partnership in this article in continuation to our entrepreneur journey articles under Career and Investment Planning Series,

Government of India introduced Limited Liability Partnership (LLP) in 2008 under Limited Liability Partnership Act, 2008. It requires two partners to incorporate and introduced to protect and manage partnership firm business.  

Features of Limited Liability Partnership  

  • A minimum of two people as designated partners required to form LLP.  
  • There is no upper limit on the maximum number of partners. 
  • At least one designated partner must be a resident of India. 
  • The Liability of each partner is limited to the contribution made by the partner.  
  • It provides protection to the partners. For example, one may sue the LLP, not the partners individually in case of any dispute. 
  • It requires some compliance to be followed, being incorporated with the Ministry of Corporate Affairs. 
  • There is no requirement of minimum capital contribution. 
  • Non-availability of the concept of equity or shareholders make It difficult for anyone to invest in LLP. The shareholders must be partners in the LLP and take up all the responsibilities of a partner. Thus, Angel Investors or Venture Capitalists prefer to invest in a company rather than an LLP, making it difficult to raise capital. 

Formation Procedure

  • Digital Signature Certificate (DSC)  needs to apply from the applicable competitive authorities. 
  • You will apply Designated Partner Identification Number (DPIN) once Digital Signature Certificate (DSC) is received It is a registration number generated for every director or partner. It will be used for director or partner’s related applications and compliances. 
  • You will apply for reserving LLP name once Digital Signature Certificate (DSC) and Designated Partner Identification Number (DPIN) is received. You will get your choice of entity name subject to name availability and the priority defined in the application. you need to apply for its allocation with following documents within the 30 days of name reservation, once your LLP name is reserved: 
    • LLP Agreement 
    • LLP Incorporation Document and Statement 
    • Proof of Registered Office Address 
    • Compliance Certificate 
  • You will receive Limited Liability Partnership Identification Number (LLPIN), once your name allocation is approved. 
  • You will apply for Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN), once Limited Liability Partnership Identification Number (LLPIN) is received.

Post Formation Procedure

  • You will arrange LLP Stamp once, the Limited Liability Partnership Identification Number (LLPIN) is received, Then, you need to open a bank account in the name of LLP. 
  • You also need to apply for applicable registration as per requirement of your business operations for example: 
    • Goods and Service Tax Identification Number (GSTIN) 
    • Food Safety ad Standard Authority of India Registration Number (FSSAI Number) 
    • Trade License Number
    • Real Estate Regulatory Authority Registration Number (RERA Registration Number)
    • MSME Certificate, If your entity is Micro, Small & Medium Enterprise.

As an individual, you may find it difficult to handle all the operations related to Limited Liability Partnership formation. Hence, now it is time to apply simple strategy which we have explained under General Management Application article under What It Takes To Be Successful series that’s

when you cannot perform one task or incapable of performing one task then, recruit or onboard someone who will get the job done for you.

. So, hire a Chartered Accountant (CA) / Certified Management Accountant (CMA) to handle company formation formalities.

We have already explained the features and formation procedure of Limited Liability Partnership in this article. Now, we will be explaining in detail about Private Limited Company and its incorporation procedure in an upcoming article of the Career and Investment Planning Series. 

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