Are you stuck with the traditional approach to business incorporation, like Sole Proprietorship or a Partnership Firm? Many entrepreneurs start with these models because they’re simple, but they often come with limitations in terms of liability, funding, and growth potential. If you’re looking for something that offers more flexibility, better protection, and easier management, a Limited Liability Partnership (LLP) could be the perfect option.
Sole Proprietorships and Partnership Firms don’t give you the option to go public.
If you want to understand the key facts, pros, and cons to make an informed decision, this article covers everything you need to know about forming an LLP and whether it’s the right choice for you.
LLP or Limited Liability Partnership can be broken down into two simple parts:
Following are the step by step process to be followed to Incorporate a LLP:
*
are mandatory)After registering on the MCA website, the next step is to get a Digital Signature Certificate (DSC) for all the Designated Partners of the LLP (DSC can also be applied at the initial stages even before Step One).
A Digital Signature Certificate is basically your digital verification key, issued by an authorized certifying agency. It needs to be Class 2 or Class 3, as certified by the appropriate agencies, and is used to sign the e-forms required for LLP registration.
The good news? You can usually get your DSC within a day of applying!
Once you’ve successfully obtained your Digital Signature Certificates, the next step is to reserve a name for your LLP.
This is a crucial step, because it lets you check if the name you want is available for approval. Names are approved on subject of availability, and only if they haven’t already been taken by someone else.
Make sure to choose a name carefully, considering trademark availability. If another company is already registered with the same name, it’s better to avoid it to save yourself the hassle of re-branding it later.
After logging in with your credentials, click on the “E-Forms” link. From there, fill out the “Run LLP form” form by entering two name options of your choice. File the form using your DSC, pay the specified fee, and wait for name approval, which usually takes about a week or so.
After successful approval of your name, you can move on to filing “Fillip-Form (Form for incorporation of Limited Liability Partnership)”.
This form also includes an option to apply for a DPIN (Designated Partner Identification Number) if any partner doesn’t already have a DPIN or DIN (Director Identification Number).
You’ll need to pay the required fees as per the prescribed guidelines. The fees may vary from state to state, since the charges differ across regions.
If you haven’t applied for a name through the “Run LLP Form,” don’t worry—you can apply for the name directly within the “Fillip Form“.
At the End you shall also Sign “Form 9 – Subscriber Sheet” which is signed by all the Designated partners. Also, here you compulsorily require a Professional to Sign the Subscriber Sheet for Approval of the same.
Finally, all Designated Partners must sign “Form 9 – Subscriber Sheet“. Keep in mind that here you are compulsorily required to get a Professional to Sign the Subscriber Sheet for Approval of the same.
Once you’ve completed all the steps and your incorporation is approved by the prescribed authority, the next step is to file “Form-3 LLP Agreement“. This agreement must be filed within 30 days of incorporation using your login credentials.
LLP Agreement should be prepared on stamp paper and notarized by the court in your jurisdiction.
Private Limited companies typically have better access to funding and investment opportunities since they can issue shares and attract venture capital, whereas LLPs have more limited funding options.
If you’re looking to secure funding sooner, it’s better to go with a Private Limited Company. Venture capitalists prefer this structure because of its ease in ownership and business exit strategies.
However, if you plan to just be bootstrapped for the long term, an LLP might be a good choice, as it offers more tax benefits.
If you’re aiming for a business with minimal government intervention and fewer compliances, a sole proprietorship might be the way to go. In this case, your primary compliance would typically be GST, that too only if your revenue crosses a certain threshold.
Audit is not compulsory under LLP Structure. Mainly the Audit shall be conducted only in the following case:
Generally, it’s advisable to get GST registration when incorporating your LLP.
However, you should first check and confirm the GST threshold based on the applicable state limits before making a decision.
Even if there’s no activity in the LLP, all compliances and tax returns must still be filed.
LLP is most suitable for businesses in the hospitality or entertainment sectors, which usually follow a revenue-sharing model.
Forming an LLP can be a great choice for those seeking limited liability, flexible management, and tax benefits. While it may not offer the same funding opportunities as a private limited company, it’s perfect for businesses that want to operate with fewer compliances and more control. By weighing the pros and cons, you can decide if an LLP structure fits your business needs and goals.
Hope these above points help clear your doubts as a Desi Founder. Check out more insights about Startups here.
Jasmeet Singh
Chartered Accountant
Article edited by Desi Founder Team
The only two unavoidable things in this world are Death and Taxes. This is a…
SUMMARY While the sale of used EVs between individuals will remain GST-exempt, old EVs bought…
Elon Musk, CEO of Tesla, has once again stirred conversation on social media by discussing…
As the festive spirit of Christmas fills the air, it is the perfect time to…
The number of netizens accessing the internet has increased with the arrival of JIO…
New Delhi, Ola Electric on Saturday said it has launched a limited 'Sona' edition of…
This website uses cookies.