Why LLP registration is the best choice for your business?
Posted: Aug 22, 2020
Choosing the right business entity is the most important choice that you’ll ever make when you are starting your business. Choose a wrong one, and your entrepreneurial dreams would take a dive into an unsuccessful abyss. But if you choose the right one, then regardless of the quality of your product/service, you can gain success. LLP Registration is a business entity that fits every type of business like a glove.
In this article, we shed a light on the following questions?
- What is LLP?
- What are the benefits of an registering an LLP?
- How you can register your business as an LLP?
- Who Should not register LLP?
- How to register an LLP without doing anything from your end?
LLP is short for Limited Liability Partnership. It’s business structure is similar to traditional partnership i.e. it’s a business entity that is formed by the partnership of two or more individuals. However, unlike partnership, where the partner’s are fully liable for the losses of the partnership, limited liability limits that liability. Thus, you can say that it has the financial nuances of a public limited company. The features of an LLP are as follows:
- An LLP is an entity that’s separate from its partners.
- The members of an LLP enjoy limited liability.
- The taxation model of an LLP is similar to a traditional partnership.
- There should be at least two designated partners within an LLP.
- The "trading disclosure" requirement of an LLP is the same as a company.
- The accounting process that they have is same as a company.
Like I said, an LLP has the abilities of both a company, and a traditional partnership. That aspect alone makes Limited Liability Partnership registration a good move for entrepreneurs, especially the ones involved with financial services/products.
- It keeps the personal assets of the partners safe: Because the partners enjoy limited liability in an LLP, they are only liable for its losses to the extent of their own share subscriptions.
- It keeps the business organization stable: Everything profit generated, every responsibility bestowed, and every decision made has a proper structure. It’s only possible because an of the LLP agreement that all partners sign prior to starting business.
- You can choose the membership within your LLP: Because there are both designated and undesignated members within an LLP, you can choose to function as you wish for.
- You can literally grow indefinitely: There is no limit to the maximum members an LLP can have. Thus, when you register LLP, you are opening doors to infinite opportunity.
- You are not required to audit the accounts: Unless your contributions to the LLP exceed INR 25 lakh, or your annual turnover is more than INR 40 lakh, you don’t need to audit your accounts.
- It doesn’t cost to register an LLP: LLP registration cost is kept at a lower end of the pricing spectrum. In fact, if you don’t have any initial capital to contribute into your LLP, you will not have to pay a single dime to the government to get LLP registration in India.
The LLP company registration process is as follows:
- Go to the MCA website and register as a new user.
- Login and upload your digital signature certificate (DSC).
Note: Prior to the first step, you have to get DSD and Designated Partner Identification Number. Any certified CA or CS can help you acquire them.
- Reserve the name of your LLP by filing and submitting the RUN application (Form 1). It’s an important step to register LLP online. It will ensure that the name you’ve chosen for your Limited liability partnership can be incorporate under the laws of MCA.
- After reserving the name of your LLP, file the online FORM 2 for LLP incorporation.
- After your LLP is incorporated, File the LLP agreement to complete the process.
When you’re filing the application, remember to attach the following documents:
- Your ID proof.
- Your residential proof.
- Residential proof of the office of your LLP.
LLP registration isn’t for everyone. There are instances where people get sucked in by all the glitz and glamour that the "flexibility" of Limited Liability provides. Those people find it hard to maintain a proper structure because LLP doesn’t provide any proper instructions of how to go about your business.
- If you want to start a small business, you shouldn’t register as LLP.
- If you are just starting up, don’t choose LLP as your business entity.
As the entire process is online, you don’t have to worry about using paper. Furthermore, because only a certified Business consultant aka a CA or a CS has the right to file the application, you don’t have to move a finger to get your LLP Registered.
Just make sure that you contact the right LLP consultants for your LLP firm registration.
Vicky kumar is a company analyst in IP1 License.