A limited liability partnership is a corporation created and registered under the Limited Liability Partnership Act, 2008, and is a distinct legal entity from its members. An endless succession is a feature of an LLP, and any changes in the members have no bearing on the entity’s existence, rights, or obligations. Learn more about designated partner.
What is the concept of LLP in India?
A Limited Liability Partnership (LLP) is a type of business organisation that combines the advantages of a corporation and a partnership. It is a preferred business model for many small and medium-scale businesses in India. Limited Liability Partnerships are legally distinct from their partners and provide the partners with limited liability. This means that the partners’ personal assets are not at risk in the event of a business failure.
An LLP has at least two partners and a maximum of 200 partners. All partners are required to contribute to the capital of the company. Partners are liable for business debts, but only to the extent of their contribution. To be eligible to form an LLP, the partners must be citizens of India or a corporate body established in India. The partners must be 18 years of age or above and have the capacity to enter into a contract. The partners must also have the necessary skills, experience, and knowledge to manage the business.
Who Can Form an LLP in India as of now?
- Nationality: Partners in an Indian limited liability partnership must either be Indian citizens, foreign residents, or foreign nationals. In addition, companies can join as long as they follow specific guidelines set by applicable authorities and gain their authorization for partnership status.
- Age: To legally operate as an LLP, enter contracts, and manage its affairs, all partners must possess sufficient legal capacity and comply with regulations.
- Mental Capacity: For an LLP partnership to function smoothly and fulfil its responsibilities effectively, its partners must possess sound mental capacities. This means they should not suffer any legal disabilities or mental incapacitation that limit their decision-making skills.
- Skills and Experience: Although no academic or professional qualification requirement exists for becoming an LLP partner, partners are expected to possess all of the expertise, experience, knowledge, credentials and credentials to run their respective LLP businesses successfully – such as industry expertise, financial acumen and business administration capabilities.
Eligibility Criteria for Partner Selection
- Individual Partners: Individual partners should be Indian citizens or permanent residents living within India without unresolved bankruptcies or criminal convictions that would prevent them from managing the business effectively.
- Corporate Partners: Corporate partners may also take the form of an Indian agency, overseas business enterprise, LLP, or some other legal entity with enough power and permission to enter contracts and participate in business activities.
- Designated Partners: Every Limited Liability Partnership (LLP) needs to rent at least two unique partners; at least one must rather be an Indian resident. Designated partners are answerable for overseeing daily affairs in their LLP whilst upholding compliance with relevant rules and policies.
- Non-Resident Indian (NRI) Partners: Non-resident Indians can become partners of an Indian limited liability partnership (LLP), provided they appoint an agent from within India as their representative to act on their behalf and ensure compliance with Indian regulations.
Compliance Requirements
Each member of an LLP must uphold certain legal and regulatory obligations, such as those related to:
Acquire a Digital Signature Certificate (DSC): Each partner should obtain their own DSC for electronic document filing and authenticating forms/applications.
Partners of an LLP must submit PAN and Aadhaar numbers during registration for verification and linkage as part of KYC documentation, in addition to KYC forms providing evidence of identity and address.
Compliance With Foreign Exchange Regulations and Tax Compliance: Foreign partners of an LLC should abide by certain foreign exchange regulations when repatriating profits and dividends to their home countries; partners in an LLP entity are accountable for paying their income tax returns as required from it.
FAQs
What responsibilities do LLP partners have?
- Capital Contribution: Partners must contribute capital as agreed.
- Management: Partners are responsible for the management and decision-making processes of the LLP.
- Compliance: Partners must ensure timely filing of annual returns and maintain statutory records as required by law
Is there a minimum capital requirement to start an LLP?
No, there is no minimum capital requirement for forming an LLP. Partners can contribute as per their business needs and financial capabilities
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