When you plan to set up business in India, the first thing you need to do is decide the type of business structure you want to have. There are various types of business structure that is permitted in India namely, sole proprietorship, partnership, limited liability partnership, private limited companies, and public limited companies. Different types of business structures have different advantages and limitations. The type of structure that would be most suitable for your business depends on the size of your business and the needs and expectations of all the stakeholders. In this article we will discuss the steps involved in setting up LLP in India.
Limited Liability Partnership (LLP)
LLP is a fairly recent type of business structure to be introduced in India. It came into existence in early 2008 with passage of the Limited Liability Partnership Act 2008. It is a hybrid kind of business structure combining the features of partnership and limited liability companies. The need for an alternative form of business structure was underlined by the fact that business owners were burdened by the unlimited liabilities in partnerships, and at the same time didn’t want their business to be subjected to the strict regulatory norms and compliance of the limited concerns. With this idea in mind, the government came up with the concept of limited liability partnership.
Steps Involved in Setting up Limited Liability Partnership
The process of incorporating an LLP is quite simple and streamlined and the entire procedure can be completed online, even without the help of a legal or accounts professional. The steps involved in the process are discussed below.
Digital Signature Certificate
A digital Signature Certificate (DSC) is an electronic proof of identity that contains the personal details of the holder. It is issued by various Certifying Authorities appointed by the Controller of Certifying Authorities (CCA). Since all forms and applications are filed online, it requires the digital signatures of all the partners of the LLP to verify and authenticate them. A DSC is issued with a validity of 2 years. Any document filed online and digitally signed cannot be tampered with. All partners of an LLP are required to procure DSCs which is linked to their PAN. There three classes of DSC, all with different levels of security.
Reserving LLP Name
Every LLP must have a unique name that is neither used by any other business organization, nor should be similar sounding with any other company’s name. The process of name reservation requires applicants to file the form RUN-LLP (Reserve Unique Name-Limited Liability Partnership). Applicants can file two names in order of preference, citing significance of both the names to the firm. If none of the names is approved, the applicant is allowed to file fresh application with two new names. Once a name has been approved, it is reserved for 90 days. Within this 90 days period rest of the formalities have to be completed. Use of certain words in the firm’s name are subject some capital requirements. For example, a firm that wishes to use the word “industries” in its name must have a paid up capital of not less than one crore.
Incorporation and DIN Application
The next step in the process of setting up LLP in India is the filing of incorporation and DIN application. The application can be made on FiLLiP (Form for incorporation of Limited Liability Partnership). Under this procedure, application for DIN for maximum two designated partners can be made. If there are more than two partners in the firm, their DIN can be obtained at a later stage. Few documents, such as registered office address proof and subscriber’s sheet, are required to be submitted along with the application. The application form has to be attested by the partners with their digital signatures and certified by a CA/CS/CWA. The application is then processed by the Central Registration Centre, which can call for additional documents if it deems necessary. Maximum of 20 day time is given for form re submission.
Upon approval, a Certificate of Incorporation is issued along with the DPIN/DIN of the partners. It also has the Limited Liability Partnership Identification Number (LLPIN). The LLP is now a legal entity and can start its business operations.
Application for PAN and TAN
Now, application for PAN and TAN has to be made in form 49A and 49B respectively to the income tax department. The certificate of incorporation has to be attached along with the application. Both, online and offline options are available.
Drafting and Filing LLP Agreement
The final step in the process is to carefully draft and file the LLP agreement. Essential details, such as the name, business objectives, place of business, etc., has to be included in the agreement. Also, paid up capital, profit sharing ratio of the partners, their rights and responsibilities, etc., have to be laid down in the agreement.
Once the agreement is finalised, it has to be signed by the partners and attested by witnesses, and the agreement is executed on payment of applicable stamp duty. The process of setting up LLP in India is now complete. Visit at Ahlawat & Associates- Best company secretarial services provider in India.