Is an LLP the right choice for you?
A limited liability partnership combines the flexibility of a partnership with the protection of a separate legal entity. Partners’ liability is limited to their agreed contribution, the LLP can own property and sue in its own name, and it continues even when partners change. For many professionals, consultants and family businesses in Gurugram, it is a practical middle path between a partnership firm and a company.
| Point | LLP | Private limited company | Registered partnership firm |
|---|---|---|---|
| Law | LLP Act, 2008 | Companies Act, 2013 | Indian Partnership Act, 1932 |
| Separate legal entity | Yes | Yes | No |
| Liability of owners | Limited to contribution | Limited to shares | Unlimited, joint and several |
| Registration | Registrar under MCA | Registrar under MCA | Registrar of Firms of the state |
| Statutory audit | Only above prescribed limits | Always | Not under partnership law |
| Annual MCA filings | Form 8 and Form 11 | AOC-4, MGT-7 or MGT-7A and others | None |
| Bringing in equity investors | Limited | Easiest | Not practical |
| Income-tax rate | 30% plus surcharge and cess | Company rates | 30% plus surcharge and cess |
If you mainly need limited liability with light compliance, an LLP usually fits. If you plan to raise outside equity, look at company registration. If you want the simplest structure and accept unlimited liability, see partnership firm registration.
Partner and designated partner rules
- Minimum two partners. If the number falls below two for more than six months, the remaining partner can become personally liable for obligations incurred after that period.
- At least two designated partners. They must be individuals, and at least one must be resident in India.
- Bodies corporate as partners. A company or another LLP can be a partner, acting through a nominee individual.
- DPIN and DSC. Each designated partner needs a DPIN and a digital signature certificate. Where a person already holds a DIN, it is used as the DPIN.
- Changes later. Admission, retirement or change in designation of partners is reported to the Registrar in Form 4 within the time allowed, and the LLP agreement is amended through Form 3.
LLP registration process, step by step
- Name search and RUN-LLP. We check the MCA records and trademark registry and apply for the name. An approved name is reserved for a limited period, within which the incorporation document must be filed.
- Digital signatures. Class 3 DSCs are obtained for all designated partners.
- FiLLiP. The Form for incorporation of LLP is filed with partners’ details, contribution, registered office and business activity. DPIN for designated partners who do not have one is applied for in the same form. Professional certification of the form is done by an associated practising professional.
- PAN and TAN. Applications are made through the incorporation process, so the LLP gets its PAN and TAN without a separate application.
- Certificate of incorporation. The Registrar issues the certificate with the LLP Identification Number (LLPIN).
- LLP agreement in Form 3. The agreement is printed on stamp paper or e-stamped as per the stamp law of the state, signed by all partners and filed within 30 days of incorporation.
What the LLP agreement should cover
The LLP agreement decides how your business is actually run, so we draft it around your arrangement rather than copying a sample.
| Clause | Why it matters |
|---|---|
| Contribution of each partner | Fixes the capital, the form of contribution and the procedure for adding more |
| Profit and loss sharing ratio | Decides each partner’s share and the basis of the tax computation |
| Remuneration and interest to partners | Must be authorised in writing for the LLP to claim the deduction in its income-tax return |
| Powers and duties of designated partners | Clarifies who signs, who files and who handles banks |
| Admission, retirement and death | Avoids disputes when the partner group changes |
| Restraint and confidentiality | Protects clients and business information |
| Dispute resolution | Arbitration or mediation before going to court |
Converting a partnership firm into an LLP
An existing partnership firm can convert into an LLP while keeping its business running. All partners of the firm must become the partners of the LLP, and no new partner can be admitted at the time of conversion. The application for conversion is filed together with FiLLiP and supported by the partners’ consent, a statement of assets and liabilities certified by an associated practising professional, and creditors’ consent where required. After the certificate of registration is issued, the firm’s property, licences and contracts vest in the LLP, and the Registrar of Firms is informed. GST registration, bank accounts and other licences then have to be updated in the LLP’s name. The income-tax effect of conversion depends on how capital accounts and assets are carried over, so we review it with you before filing.
Annual compliance calendar for an LLP
| Filing | Due date or time limit |
|---|---|
| Form 11 (annual return) | Within 60 days of the end of the financial year, that is 30 May |
| Form 8 (statement of account and solvency) | By 30 October |
| Income-tax return in ITR-5 | By the due date for the LLP’s category, earlier if a tax audit applies |
| Audit of accounts | Only if turnover exceeds Rs 40 lakh or contribution exceeds Rs 25 lakh |
| Form 4 for partner changes | Within 30 days of the change |
| Form 3 for changes in the LLP agreement | Within 30 days of the change |
| DIR-3 KYC of designated partners | Every year by the due date |
Our ROC compliance service handles these filings every year, and our income tax filing team prepares the LLP’s return.
Why form your LLP with KSV in Gurugram
- Agreement drafting in proper legal language, reviewed with all partners before signing.
- Tax view from the start, including partner remuneration and interest within the income-tax limits.
- Connected services such as GST registration, book-keeping and annual filings with one team.
- Updates on WhatsApp and meetings at our Gurgaon office when you need them.
KSV is a tax and accounting consultancy run by Kailash Vashisht (B.Com, MBA Finance). It is not a firm of chartered accountants or company secretaries; forms that require professional certification are certified by an associated practising professional. Call or WhatsApp +91 88606 30505 or use our contact page.
Frequently asked questions
How many partners does an LLP need?
At least two partners, with no upper limit. At least two of them must be designated partners who are individuals, and at least one designated partner must be resident in India, which broadly means having stayed in India for at least 120 days during the financial year.
What is the difference between a partner and a designated partner?
Every designated partner is a partner, but designated partners carry the statutory responsibility for filings and compliance under the LLP Act, 2008. They need a Designated Partner Identification Number (DPIN) and a digital signature, and they are answerable for penalties if the LLP defaults.
Is there a minimum capital contribution for an LLP?
No. Partners can start with any contribution they agree on, in cash or in kind. Government fees and stamp duty on the LLP agreement depend on the contribution, so it is sensible to choose a realistic figure.
When must the LLP agreement be filed?
The LLP agreement must be filed with the Registrar in Form 3 within 30 days of incorporation. Late filing attracts an additional fee for each day of delay. If no agreement is filed, the default provisions in the First Schedule of the LLP Act apply, which rarely suit the partners.
Does an LLP need an audit?
Under the LLP rules, accounts must be audited only if turnover in the financial year exceeds Rs 40 lakh or partners' contribution exceeds Rs 25 lakh. A tax audit under the Income-tax Act can still apply separately where the business crosses the tax audit limits.
What are the annual filings of an LLP?
Form 11, the annual return, is due within 60 days of the end of the financial year, which is 30 May. Form 8, the statement of account and solvency, is due by 30 October. The income-tax return is filed separately in ITR-5. Delays in Form 8 and Form 11 attract an additional fee for every day of default.
Can a partnership firm be converted into an LLP?
Yes. A firm can convert into an LLP when all partners of the firm become partners of the LLP and no one else is added at the time of conversion. The application for conversion is filed along with the incorporation document, and once the certificate of registration is issued, the assets, liabilities and contracts of the firm move to the LLP.
LLP ya private limited, kaunsa better hai?
It depends on your plans. An LLP has lower compliance and is well suited to professionals, family businesses and small trading or service firms. A private limited company is better if you want equity investors, ESOPs or a structure that banks and investors are more familiar with.
Can a foreign national or company be a partner in an LLP?
Yes, in sectors where full foreign ownership is allowed under the automatic route and there are no performance-linked conditions. At least one designated partner must still be resident in India. Our foreign company set-up page covers this route.
How is an LLP taxed?
An LLP is taxed like a partnership firm, at 30% plus surcharge where applicable and cess. Remuneration and interest paid to partners are deductible within the limits laid down in the Income-tax law, and the partners' share of profit is not taxed again in their hands.