Limited Liability Partnership (LLP) Formation
A Limited Liability Partnership (LLP) is a registered entity formed under the Limited Liability Partnership Act, 2008 (LLP Act). It combines limited liability like a company with partnership flexibility, creating a unique business form for liability protection and operational flexibility.
Legal Status of LLP
LLP operates separately from its partners.
It enjoys perpetual succession, continuing even if partners change.
Partners have limited liability, restricted to their agreed contributions.
The mutual rights and duties of partners are governed by a formal LLP agreement.
Setting Up a Limited Liability Partnership (LLP) in India
To incorporate an LLP in India, a minimum of two partners (individuals, companies, or both) is required, with one designated partner being a resident of India. While there is no mandatory minimum capital, a minimum of INR 10,000 is advisable.
Charter Documents
LLP Agreement: Details the LLP’s name, objectives, partners, registered office, rights, duties, contributions, and capital.
Foreign Representation: If a foreign company is involved, it must authorize an individual via a board resolution.
Non-Dual Representation: Two required partners (one individual and a foreign nominee) must be distinct.
Eligible Investors for LLP Formation in India
Eligible investors include all foreign persons/entities, excluding:
Foreign Portfolio Investors (FPIs)
Foreign Institutional Investors (FIIs)
Foreign Venture Capital Investors (FVCIs) registered with SEBI
Approvals and Setting Up Formalities
Foreign Direct Investment (FDI)
Up to 100% FDI is allowed in most sectors under the automatic route, with post-incorporation filings required with RBI.
Investments are routed via RBI-authorized banking channels, following share issuance pricing guidelines by RBI.
Incorporation of LLP with the Registrar of Companies (ROC)
Required details must be submitted to ROC, which issues a Certificate of Incorporation, confirming LLP establishment.
Income Tax Compliance for LLPs
An annual Return of Income (ROI) must be filed with the Income Tax Department.
Extensive documentation is required if international transactions exceed INR 10 million, or specified domestic transactions exceed INR 200 million.
Quarterly withholding tax returns (TDS returns) must be filed for certain payments to residents and non-residents.
Goods and Services Tax (GST) Compliance
GST registration is mandatory if turnover exceeds INR 2 million annually or for inter-state supply of goods/services.
Monthly and annual GST returns must be filed, along with a GST audit if applicable.
