Limited Liability Partnership

LLP (Limited Liability Partnership)

LLP form is selected by many entrepreneurs who want to start a business in India due to its low cost, flexibility, low risk, and beneficial regulatory structure. LLP allows you to form a partnership with two or more people and enjoy the feature of limited liability.

There should be at least 2 partners to start an LLP. Limited liability, perpetual existence, and well-regulated business structure are making entrepreneur select LLP. It’s also lighter on compliance and tax liability compared a private company.

However, the limited liability feature of LLP is not as comprehensive as that of a private limited. The limited liability offered by LLP cover liabilities created by the entity but not the liabilities created by fellow partners. i.e. the LLP is liable to make good the loss or liability created by if its partner in the course of the business by mistake, wrongful act or omission on his or her part.

Documents Required

• Copy of PAN
• Copy of Aadhar Card or Driver’s License or Passport or Voter’s ID
• Address Proof – Latest Bank Statement or Telephone or Mobile Bill (not older than 2 months)
• Passport Size photograph in JPEG format.
• Address Proof of place of business- (Electricity Bill/Tax Paid receipt) and No objection letter from owner of the premise

Process:

• Filing LLP name application
• Applying digital signature registration for the Designated Partners
• Preparing LLP incorporation documents
• Filing incorporation forms with MCA
• Obtaining certification of incorporation
• Applying PAN and TAN
• Preparing LLP agreement (The LLP agreement is the documents setting out the rights and liabilities, investments, roles and responsibilities of each partner.)
• Filing LLP agreement with MCA with in 30 working days.

Tax

Corporate tax: It is a form of direct tax on profits of LLP. Income of a partnership firm is taxed at 30%. In addition to this there is a 2% education cess and 1% secondary and higher education cess applicable.

Tax on LLP Partner Remuneration: Any income from the LLP to its Partners is taxed as business income in the hands of the Partner. Individual tax rates are applicable in this case.

Good and Services Tax (GST): Any business dealing in purchase and sales of goods and services in India comes under purview of Indirect Taxation. You have to enrol for GST as and when you reaches the turnover thresholds.

Audit and Compliance

Statutory Audit is not mandatory for your LLP up to a certain turnover. However if the LLP turnover exceed INR 40 Lakh or the capital contribution from partners exceed INR 25 Lakh, they are required to annually get their accounts audited. Annual reporting of financial position and operations of the LLP to Registrar of LLPs and Income Tax department is mandatory. There is a per day penalty if you miss the due dates.