With the growing start-up culture in India, young entrepreneurs are becoming trendsetters in achieving great heights with the new culture in the office and creative ideas to make their dream company a success.
But the question lies in how to grow the company with partnership benefits and also with limited risks. Enter LLP. A limited Liability partnership or LLP is a separate legal entity that cares about your liabilities and gives you the freedom to manage partnerships without mistrust.
Owing to zero accountability for other partners' misdeeds and a hundred percent safeguard of personal assets in case of business debts or dissolution of the company, LLP Registration in India is growing uphill.
This article will enlighten you on what to expect when you apply for an LLP registration in Mumbai and how it can propel your business with minimum risk.
Before jumping into the working of LLP, you have to understand the different types of company structures to make the right decision for your company.
It depends on the type of company you have, how much you want to involve in the administration, and the level of personal liability you can take for your business debts.
In India, we have four types of company structures, and each has its pros and cons.
In this structure, a singer person owns and manages the company. They take care of profit, loss, and liabilities by themselves. This model is suitable for small traders and vendors.
This type of business is for two or more individuals who enter into a partnership and share the profit and loss of the company. Unless you have a small vendor business or a home business where you can distribute the profits or the liabilities, this should be your last choice.
The most popular type of business structure is a Private Limited company. This type of company is best suited for start-ups that are open to outside funding. It also limits your liabilities, as only the amount invested will be lost during any misfortune events.
However, high tax rates and complicated registration norms make you wait before jumping right into it.
An LLP is a recent addition in India but has gained wide popularity because it is a hybrid model of Partnership firms and Private Limited.
This model can have unlimited partners, unlike a Private Limited Company where the upper limit is 200. Each partner is liable for only the amount they have invested in the company.
Mumbai, the financial capital of India, is booming with potential LLP companies, and the LLP Registration fees in Mumbai are not huge.
So, if you own a start-up and are looking to register as an LLP, we are here for you. With the rich experience of implementing many start-up registrations, we are more than ready to make your journey smooth and easy.
An LLP can be a boon to your company in many aspects. It is highly beneficial if you take an LLP registration in India.
If you enquire with your lawyer, he will brief you that an LLP is a separate legal entity that holds you accountable for all your company assets without putting your reputation or personal assets at stake.
For instance, you have a company with your partners in the form of a general partnership. While the profits and losses are shared equally, what about the liabilities? They are shared too. Unfortunately, one of your partners has messed with the company assets, and by no fault of yours, even you are held accountable.
It is the reason why you have to register for an LLP. If you take an LLP registration in Mumbai, your company will be listed as an LLP and not in your name. Hence, the creditors cannot claim your private belongings as a part of debt clearance.
Limited Liabilities mean that you will lose assets belonging to the partnership and not own assets. It is safe to say that an LLP acts as a wall between your company assets and private assets.
Following are the unique features of an LLP and why LLP Registration in India is flourishing.
There are many advantages of getting an LLP in Mumbai. One of them is the LLP registration fees in Mumbai which is comparatively cheaper than registering for a Company. Some of them are listed below:
An LLP is a separate entity different from its partners. It has an identity, and all contracts are signed in the name of the LLP and not as an individual. In short, an LLP is like a legal person liable to all the assets a company owns, while the partners' liabilities are limited to the amount they have contributed. They are not accountable for their partners' misdeeds.
The LLP registration fees in Mumbai are cheaper compared to Company registration.
The compliances that an LLP should follow are low. It needs to file only two statements in a year. One is an Annual Return and another is a Statement of Accounts and Solvency.
Unlike a company, an LLP does not require any minimum capital. The partners can contribute any amount to make an LLP registration in Mumbai.
Private or Public Limited companies have to file for tax audits every year. In the case of an LLP, only those LLPs having an annual turnover of INR 25 lac or INR 40 lac need to file for tax audit reports according to the LLP Act.
As said earlier, you need minimum documents to file for an LLP in Mumbai. They are:
The overall time taken to get an LLP registration in Mumbai is 15 - 20 working days after getting government approvals.
Since the filing process can be online, you can pay the LLP registration fees in Mumbai through the MCA Portal. There are five steps in the registration process, and they are listed below:
It is required to get a Digital Signature certificate from all the partners to ensure the security and authenticity of the documents submitted online. The Controller of Certifying Authority issues the DSC after verification.
All partners should obtain a Designated Partner Identification Number (DPIN). You can get a DPIN by filing an e-form DIR-3.
If you already have a Director Identification Number (DIN), you can use the same as DPIN.
The next step is to reserve a name for your LLP. You should apply through RUN (Reserve Unique Name). The proposed name should not be similar to any existing partnership firm or a corporate body. Only after confirming this, the Registrar's office will approve and proceed further.
The form to be filled to file for the incorporation is FiLLiP (Form for incorporation of Limited Liability Partnership).
MCA will take up to 5 - 7 days to review this application and approve it. You will get an LLP Incorporation Certificate after that.
Once you get the approval for incorporation, you need to file for an LLP agreement. You have to use Form 3 on the MCA portal and apply within 30 days of incorporation of LLP. Simultaneously apply for PAN and TAN and fill out the income tax returns. You will receive the LLP agreement, after which you can start functioning.
While the process takes time, the cost of application is low. If you want to enjoy the benefits of this, the LLP registration fees in Mumbai are quite reasonable.
Like every business structure, an LLP also comes with some cons. Your liabilities may extend in case the third party sues the LLP, or getting outside funding might be difficult given that the shareholders in an LLP must be partners too and the risk of heavy penalty if not complied with the terms.
You have to discuss with your partners and come to a common ground to decide what is best for your company. Take the first step to change the world by getting an LLP registration in Mumbai and see your ideas come to reality.