LLP Registration
Advantages
- Limited Liability Protection
- No requirement of Audit
- Lower Registration Cost
- Separate Legal Entity
- Less Procedural Compliances
Meaning of Partnership Registration
In India, Partnership Act, 1932 lays down the definition and regulations for Partnership Firm and the provisions of this act (under section 4) defines partnership as – “An agreement between persons who have agreed to share profits of the carried on by all or any one of them acting for all.”
When two or more persons have the same business idea and they wish to work together to turn that idea into reality, they get into partnership by incorporating a partnership firm. So, Partnership is combined ownership of a business between two or more people. Like a sole proprietorship, there is no legal separation between the business and the individual partners. The partnership is formed by an agreement among the partners in which all the terms of partnership is discussed.
The Registration of a partnership firm is not compulsory, though it is usually done as registration brings many advantages to the firm. It is optional for partners to set the firm registered & there are no penalties for non-registration but it is always advisable to get the registration done as it bestows a legal existence and avoid conflicts in future. Partnership Registration is done on their respective state websites.
LLP is one of the easiest types of businesses to incorporate & manage and it integrates the advantages of a Partnership Firm and a Company.
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Features of Partnership Firm
- Governed by- Partnership Act, 1932
- Applicable to- any business, profession or industry
- Profit & Loss Sharing- Based on a mutually predetermined ratio
- Liability- Unlimited, It allows the use of personal assets to set off the losses.
- Tenure- Not fixed, it depends on the partners’ will or as specified in the partnership deed. However, death/retirement/insolvency of any partner among the two auto-dissolves the partnership.
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Advantages of Partnership Registration
- Quick Response & Decision-making- Each partner can act independently on behalf of other partners, which enables the business to respond quickly to problems by lowering the amount of bureaucracy involved in decision-making.
- Profits in Predetermined Ratio- Profits are passed directly to each partner following their Ratio under the partnership agreement. Each individual is then taxed normally on his portion of the partnership’s profits.
- Low Commencement Cost & Lesser Formalities- Partnerships have low startup costs, few formalities & limited external regulation. Partnership firms are easy to establish at a low cost.
Is it necessary to Register a Partnership Firm?
According to the Indian Partnership Act, 1932 which governs the partnerships, Registration of partnership firms is optional and at the discretion of the partners.
Registration of partnership firms may be done at any time – before starting a business or anytime during the continuation of the partnership.
It is always advisable to register the firm since registered firms enjoy special rights which aren’t available to the unregistered firms.
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Documents Required For The Registration Of A Partnership Firm
- Application for registration of partnership (Form 1)
- Specimen of Affidavit
- Certified original copy of Partnership Deed
- Proof of principal place of business (ownership documents or rental/lease agreement).
If the registrar is satisfied with the documents, he will register the firm in the Register of Firms and issue Certificate of Registration.
Register of Firms contains up-to-date information on all firms and can be viewed by anybody upon payment of certain fees.
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Wrapping up
The role of Partnership firms is indeed critical for those with dreams of start-ups and profit & loss sharing. At one extreme, Partnership firm combines the fund of each partner and forms a big source of investment and at another extreme, it divides the risks, losses & uncertainties among the partners. Similarly, profits are dispersed among the partners in a certain predetermined proportion.
Therefore, to avoid conflicts over profit-sharing, decision making, loss bearing on later stages, a duly stamped partnership deed must be prepared and the Partnership firm must be legally registered. Registration of a partnership firm is very important yet very easy that requires only a few lawful formalities.
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Registration Process of Limited Liability Partnership
The Ministry of Corporate Affairs vides its notification dated 18th February 2020 effective from 23rd February 2020 has further amended the Companies (Incorporation) Rules, 2014 thereby substituting the old Form INC-32 (SPICe) with web service SPICe+ along with certain other amendments.
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Name Application Through Run On MCA Portal
The first step is to make an application for reservation of name which shall be reserved by using the web services (RUN LLP) available at www.mca.gov.in along with the specified fees. Two proposed LLP names (along with their justification) are applied online via RUN LLP form on the MCA portal.
Before applying for a name, kindly check that the name is available on MCA as well as no trademark if there is no such name under the Class of work you are going to apply for Click on the below-given link to check: Trademark Registration. Once the name is allotted by the Ministry, it is reserved for a period of 20 days from date of approval.
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Before initiating the process of registration, you must apply for class 2 digital signatures of the designated partners of the proposed LLP. This is due to the fact that all LLP documents are submitted online and must be digitally signed.
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Form FiLLiP is the application form for the incorporation of the LLP. FiLLiP is an integrated form that offers a number of services, namely allotment of DIN, Reservation of Name and Incorporation of LLPs.The application for incorporation of LLP shall be accompanied with documents like subscriber’s sheet, directors KYC, consent form and registered office address proof. The e-form has to be digitally signed by one of the partner of LLP through their DSC and certified by the practicing professional (CA/CS/CWA).
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Once the E-Form FiLLiP is approved by the Ministry, the Certificate of Incorporation is provided via E-mail.
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The last step is to file a limited liability partnership agreement, The agreement governs the mutual rights & obligations between the partners and between the LLP & its partners. The LLP must be submitted within 30 days of the inclusion of Form 3 and must be printed on stamp paper and should be duly notarized. The rate of stamp duty depends on the state and the capital contribution of the LLP.
LLP Partnerships is a new and convenient concept that does not require any minimum capital. Besides, the registration cost is reasonable.
If you wish to commence your business with Limited Liability Partnership, then it is very important to get it registered under Limited liability Partnership Act, 2008.
One must get its business registered as a Limited Liability Partnership using the legal registration services from professionals who can take on the responsibility for your taxes and commercial compliances.
