A company is incorporated for a defined purpose. Before setting up a company, the individual or a group of individuals decide on crucial factors such as type, Vision, Type of product they want to produce or/and sell or services they plan to offer, deciding the location of the business.
Defining a Partnership firm
‘The Indian Partnership Act’ of 1932, Section 4lays down the rules, regulations, and laws of a partnership firm. Partnership companies are regulated by the provisions mentioned in the act. According to the act, a partnership firm is defined as“The relation between individuals who have agreed to share the profits and losses of business.”
Limited Liability Partnerships are ideally suited for Professionals, Small Business Owners, and businesses which is not capital incentive or a business idea where the individual is looking to start the company with a minimum amount of investment. The steps required for LLP Registration in India must be followed in an appropriate manner.
Steps required for the Registration of Partnership Firm
· Drafting of Partnership Deed
· Notary and Stamping of Partnership Deed
· Filing of Partnership Firm Registration Form
· Filing of PAN application for Partnership Firm
Types of Partnership Companies
The partnership companies are majorly divided into 4 major types namely-
General Partnerships(GP)
Limited Partnerships(LP)
Limited Liability Partnerships(LLP)
Limited Liability Limited Partnerships(LLLP)
Limited Liability Partnership Online Registration Process
As per the LLP Act, 2008, the following steps must be followed for a successful registration process.
Appoint/nominate partners and designated partners Obtain Digital Signature Certificate (DSC)
File an application for DPIN (Designated Partner Identification Number)
Name reservation
Getting the name of the company approved is the next step after obtaining the unique identification number (DPIN)
Draft the LLP Agreement
Filling the Incorporation Application form
The last step of the LLP Registration Procedure in India is filing the FiLLiP Form. A FiLLiP is a form of incorporation of a Limited Liability Partnership. Form 5, Form 17 and Form 18 must be filled and submitted for approval to the Registrar in order to receive the Certificate of Registration. The partners also receiveLLPIN (Limited Liability Partnership Identification Number)
LLP Registration Documents Required
Certain documents required for LLP Registration for an appropriate filing are as mentioned below-
Identity proof of the partners such as PAN card,
Address proof of the partners such as bank statement, Aadhar card, Driving license etc,
Proof of the business place by presenting the rent agreement and bills related such as Electricity bills, Telephone bills.
Contents included in a LLP agreement
Name of the LLP
Names and addresses of the partners and designated partners
The form of contribution and interest on contribution
Profit-sharing ratio
Remuneration of partners
Rights and duties of partners
The proposed business idea
Rules and regulations that will be governing the LLP
Advantages of LLP Company Registration
A Limited Liability Partnership serves various benefits, which is why it is considered by many individuals. Some benefits it provides are-
Lower Registration cost
No restrictions on the Investment amount
No requirements of Audit
Lower Compliances to follow
Non- applicability of Dividend Distribution Taxation
Perpetual Existence
Lower Registration cost
In comparison to other company types, the cost of registration for Limited liability partnerships are much lower
No restrictions on the Investment amount
The investment amount is not fixed; thus the partners can contribute any amount. The partners can only contribute tangible, movable, steady or intangible property.
No requirements of Audit
LLP companies do not have to go through the regular auditing process of the accounts. Whereas, companies such as a private limited company, public limited companies and other similar types of companies need to have properly maintained audited accounts. Many other compliances must be followed by other companies.
Perpetual Existence
The company does not depend on the partners for their existence. This means that it is going to continue functioning even if one or more partners of the company leave, resign or terminated from the company.
Advantages of setting up a Limited Liability Partnership firm
Only or specific business types
Limited liability partnerships (LLPs) can be created by some types of professional service businesses that hold some specific specializations, such as accountants, counselors, architects, dentists, doctors, analysts and other fields in which the individual or a group of individuals are professionals under the law.
Protection of Personal assets
The personal assets of partners in an LLP cannot be used to pay off business debts and liabilities. The LLP does not protect the partners for incurring liabilities as a result of their personal performances.
Taxation benefits
Profits earned by LLP’s are taxable at 30% plus a surcharge. However, sharing of profit among the member is not liable to tax under current tax structure.
The income tax rate applicable for LLP’s registered in India is 30% on the total income. Additionally, a surcharge is levied on the income tax payable at the rate of 12% when the total income exceeds Rs 1 crores.
Process of Conversion of Company into a Limited Liability Partnership
Deciding the Partners and Designated Partners
Obtaining the Digital Signature & PIN
Reservation of Name for LLP (Form-1)
Filing of Incorporation documents (Form-2)
Filing of Conversion Application in the Form 17/18
Certificate of Conversion into LLP (Form 19)
Intimation of Conversion to ROC (Form 14)
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