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Learn more about Limited Liability Partnership in India

The Limited Liability Company is another category of a company registered under the Indian New Companies Act, 2013. There are several companies available in India, including Limited Liability Partnership and Private Limited Partnership, but the Limited Liability Company is a brand new one in the lineup. It is often referred to as a Limited Liability Company and its nature of business is quite similar to a partnership company and a sole proprietorship. Under the Limited Liability Partnership Act, liability is limited among the members or partners, and no one is responsible for the fault and liabilities of others in any case.

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What is a limited liability company?

A company is defined as a legal entity and there are different types of companies under the Indian Companies Act. The Limited Liability Company is a form of company that is very similar to a Limited Liability Company and a single business enterprise with limited legal procedures. It is often called a limited liability company by many since its inception. Limited Liability Companies are incorporated under the Indian Companies Act 1956, like other forms of companies. In the Limited Liability Company case, the most striking factor is the limited liability among the members, unlike the Limited Liability Partnership. No partner is individually responsible for the misconduct or liability of others under the rules and the company’s regulations. The registration of a limited liability company is almost identical to a private or public Limited Liability Company to obtain the registration certificate with the Registrar of Companies. Limited Liability Companies have grown impeccably due to their many advantages over other forms of companies in India.

Here are some characteristics of a Limited Liability Company:

➤ It has a separate legal entity, just like companies
➤ The liability of each partner is limited to the contribution made by the partner
➤ The cost of forming a Limited Liability Company is low
➤ Less compliance and regulation
➤ No minimum capital contribution requirement

The partners’ minimum number to form a Limited Liability Company is 2. There is no upper limit to the partners’ maximum number in a Limited Liability Company. Among the partners, there must be at least two designated partners who must be natural persons, and at least one of them must be a resident of India.

The rights and duties of the designated partners are governed by the Limited Liability Company Agreement. They are directly responsible for compliance with all the provisions of the Limited Liability Partnership Act 2008 and the provisions specified in the Limited Liability Partnership Agreement. If you wish to start your business with a Limited Liability Company, you must register it under the Limited Liability Partnership Act 2008.

Why register a Limited Liability Company?

The Indian Limited Liability Company is a very popular type of company among foreign investors interested in opening a company in India. This structure offers a set of advantages listed below, which can also be detailed by our team of India company registration consultants. The basic features are as follows:

Ownership: the company can be 100% foreign-owned, as there are no restrictions in this direction;
Liability: Investors are protected from the debts of the company, as the company is a separate legal entity;
Shareholding structure: the company needs only two shareholders for its incorporation;
Corporate documents: legal documents can be written in English, which is an important advantage for foreign businessmen;
Capital: it requires a small capital compared to other forms of business.

Regarding the company’s ownership structure, it is important to know that the shares of an Indian Limited Liability Company can be owned by both local and foreign individuals and companies. A mixture of foreign companies and foreign individuals is also allowed when it comes to the company’s shares.

How to register a Limited Liability Company in India?

The following process should be followed to properly register your Limited Liability Company in India:

Step 1. Obtain a Digital Signature Certificate (DSC)

Before starting the company registration process, you need to apply for the digital signature of the designated partners of the proposed Limited Liability Company. This is because all documents for Limited Liability Company are filed online and need to be digitally signed. As such, the designated partner must obtain their digital signature certificates from government-recognized certification bodies.

Step 2. Apply for a Director Identification Number (DIN)

You must apply for the DIN of all designated partners or those who intend to be designated partners of the proposed Limited Liability Company. The application for a DIN must be made on Form DIR-3.
You must attach the documents’ scanned copy (usually Aadhaar and PAN) to the form. The form must be signed by a company secretary employed full-time by the company or by the Managing Director/Director/CEO of the existing company in which the candidate will be appointed as a director.

Step 3. Name Approval

LLP-RUN (Limited Liability Partnership-Reserve Unique Name) is filed for reservation of the name of the proposed Limited Liability Company to be processed by the Central Registration Center. Thus, before quoting the name in the form, it is recommended to use the free name search feature on the MCA portal.
The system will provide a list of closely resembling names of existing companies based on the search criteria entered. This will help you choose names that do not resemble existing names. The Registrar will only approve the name if the name is not undesirable in the opinion of the central government and does not resemble any existing partnership or corporation or trademark registred.
The RUN-LLP form must be accompanied by the fees as per Schedule ‘A’ which can be either approved/rejected by the Registrar. A resubmission of the form must be authorized within 15 days for the correction of defects. There is a provision for 2 proposed names for the Limited Liability Company.

Step 4. Incorporation of the Limited Liability Company

The form used for incorporation is the FiLLiP (Form for incorporation of Limited Liability Partnership) which must be filed with the Registrar having jurisdiction over the state in which the Limited Liability Company’s registered office is located. The form will be an integrated form. The fee set out in Schedule A must be paid.
This form also allows for an application for the assignment of a DPIN, if a person to be designated as a named partner does not have a DPIN or DIN.
The request for an assignment can only be made by two individuals.
The reservation request can also be made through FiLLiP.
If the requested name is approved, then that approved and reserved name will be used as the proposed name for the Limited Liability Company.

Step 5. File the Limited Liability Company Agreement

The Limited Liability Company Agreement governs the mutual rights and duties between the partners and the Limited Liability Company.
The Limited Liability Company Agreement must be filed in Form 3 online on the MCA portal.
The Limited Liability Company Agreement Form 3 must be filed within 30 days of the date of incorporation.
The Limited Liability Company agreement must be printed on stamped paper. The value of the stamped paper is different for each state.

Limited Liability Company registration services are widely available in India, as company formation is a big hit among Indian entrepreneurs. The new Companies Act, 2013 has laid down all the rules and regulations regarding the formation and registration of all limited liability companies. One has to apply to the Registrar of Companies (RoC) giving all the details about the company including the name of the company, name, and address of the board of directors, and location of the company as per the company registration services. India as a business destination has witnessed considerable growth and a large number of entrepreneurs are coming to India to start various businesses. One can register a company either directly online or by hiring a professional like a trademark or patent attorney to make this process smooth.

Secondly, the initial steps of opening a company in India as a Limited Liability Company are concluded through the Ministry of Corporate Affairs. In order to obtain the digital signature certificate, the business owner must first apply for a Designated Partner Identification Number (DPIN), a procedure that can be completed on the institution’s website. The following will also apply:

➤ The DPIN is obtained by completing the DIR-3 form, which is also used to issue the Director's Identification Number (DIN)
➤ Once the company has received its Digital Signature Certificate (DSC), company representatives must register the DSC on the Department of Corporate Affairs portal; In order to avail of the online services available to an Indian limited liability company, the investor must then register as a user of the portal
➤ The investor can register the name of the company, by filling up a specific form
➤ Next, investors can draft the company's statutory documents, which must be registered with the Ministry of Corporate Affairs within 30 days of signing the documents

Regarding the regulations referring to the Indian Limited Liability Company, it should be noted that it is possible to convert an existing business into this type of company. However, this is only available for companies operating as partnerships or private companies. It can also be done if the company is registered as an unlisted public company. In order to change the current legal entity of an Indian company to a limited liability company, various documents have to be submitted to the Ministry of Corporate Affairs. In the case of companies operating as partnerships, applicants must complete Form 17 (Application and Declaration for Conversion of Firm to limited liability company) and Form 2 (Governing Document and Declaration of Subscriber). Those wishing to convert a private company or an unlisted public company into a limited liability company in India will also use Form 2, however, they will also have to complete a second document, represented by Form 18 (Application and Statement for the Conversion of a Private Company/Unlisted Public Company into a limited liability company).

What are the required documents in India?

In order to open a company in India registered as a Limited Liability Company, the representatives of the company will have to file a set of documents and the minimum requirements laid down in this regard refer to the following: the certificate indicating the name of the company, the founding documents of the company and the power of attorney.

The registration is managed by the Ministry of Corporate Affairs, which prescribes the necessary legal procedures in this regard. For example, businessmen will need to obtain a digital signature certificate, in accordance with the regulations of the Information Technology Act of 2000. The certificate is required to submit various electronic documents and can only be used by the applicant who has received the respective document.

The following important documents are imperative when applying for limited liability company registration:
➤ Certificate of Company Name;
➤ Memorandum of Association (MoA);
➤ Articles of Association (AoA);
➤ Power of Attorney.

What are the tax obligations in India?

When it comes to the taxation of an Indian Limited Liability Company, it is important to know that local laws treat this type of company as a separate legal entity from its owners. This type of company is legally required to be registered for tax purposes with the Income Tax Department, which also oversees the VAT registration process in India. The following taxes apply to this structure:

➤ The income tax payable by an Indian Limited Liability Company is 30%
➤ There is an income tax surcharge applicable at the rate of 12% if the company’s income exceeds INR 10 million
➤ In India, there is also a health and education surcharge imposed at a rate of 4%
➤ The Limited Liability Company may also be subject to the alternative minimum tax, applicable at a rate of 18.5% on the total income of the company
➤ Limited liability companies in India that are required to conduct an audit must pay their taxes using the online platform of the Income Tax Department, as required by Section 44AB of the Income Tax Act, 1961

Can foreigners own a Limited Liability Company?

The applicable legislation states that foreign businessmen are allowed to register a Foreign Limited Liability Company in this country. For this purpose, fill in Form 27 (Registration of Details by a Foreign Limited Liability Company). In this case, it is also mandatory to obtain a digital signature certificate, as the electronic form must bear the company’s representative’s signature. However, a Foreign Limited Liability Company in India is not required to have a DIN or DPIN.
The Limited Liability Company is one of the simplest forms of setting up a business in India in 2022 as it offers limited liability to its shareholders and is available for foreign investors who wish to have their businesses in India.

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