In India, the formation of a Limited Liability Partnership (LLP) is governed by the Limited Liability Partnership Act, 2008. This business structure combines the benefits of both, a company and a partnership into a single form of organization. It involves a series of steps, including obtaining digital signatures, securing identification numbers, filing incorporation documents, and more.
Obtain Digital Signature Certificate (DSC): The initiation of the LLP formation process involves the procurement of a Digital Signature Certificate (DSC) for the designated partners. A DSC is an encrypted key that authenticates the identity of the signer, providing a high level of security for online transactions by ensuring absolute privacy of the information exchanged. In India, DSCs are issued by Certified Authorities recognized by the Controller of Certification Agencies (CCA), under the provisions of IT Act, 2000.
Obtain Designated Partner Identification Number (DPIN): The next step is for the designated partners of the LLP to obtain a Designated Partner Identification Number (DPIN). A DPIN, issued by the Ministry of Corporate Affairs (MCA), is a unique identification number that needs to be obtained by all designated partners of an LLP. The DPIN offers a way to track all individuals serving as partners in different LLPs across the country, ensuring accountability and compliance.
Reserve LLP’s Name: Once the designated partners have their DSC and DPIN, they can proceed to reserve a name for the LLP through the LLP-RUN (Limited Liability Partnership-Reserve Unique Name) web service provided by the MCA. The proposed name should be unique, relevant to the business, and not too similar to the names of existing companies or LLPs. The name should also comply with the naming guidelines provided by the MCA.
Prepare and File Incorporation Documents: Upon approval of the name, the next step involves preparing and filing of various documents with the Registrar of Companies (RoC). These include:
Payment of Registration Fees: The next step involves the payment of the registration fees. The fees are determined based on the total monetary value of contribution to the LLP, as declared in the incorporation document.
Verification and Approval by RoC: After the documents have been submitted and the fee paid, the RoC reviews the documents and may ask for additional information or clarifications. Once the RoC is satisfied, it will issue a Certificate of Incorporation (CoI), which includes a unique LLP Identification Number (LLPIN). The CoI serves as proof of the LLP’s formal registration and existence.
Draft and File LLP Agreement: Following the issuance of the CoI, the LLP Agreement needs to be drafted and executed by the partners. This document, filed with the RoC, details the mutual rights, duties, and obligations of the partners towards each other and the LLP. It covers matters such as the nature of the business, capital contributions, profit sharing, dispute resolution, and procedures for changes in partnership.
Obtain PAN and TAN: After incorporation, the LLP must apply for a Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) from the Income Tax Department. These numbers are crucial for tax management purposes, including tax deductions at source.