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Home > Income Tax > Help Center > LLP - ExplainedLast Updated: Dec 02nd 2023

Limited Liability Partnership (LLP) - Explained

Limited Liability Partnership (LLP) Company explained with advantages, disadvantages, registration process and frequently asked questions. Understand more about LLP


One of the quickest, in-expensive way to float a Company is through is LLP


This document covers

  1. Concept of LLP
  2. Features
  3. Small LLP NEW
  4. Registration
  5. Advantages
  6. LLP Annual Compliance
  7. FAQs

1. Concept of LLP

  • There are many different ways to form a business, and one of the more common ways is through a Limited Liability Partnership, or LLP. This type of business structure that involves two or more people coming together to own and operate a single business. There is a wealth of benefits to be enjoyed and reasons that people choose to go the limited liability partnership route for their business. Tax benefits and limited liability are two of the biggest. While there are many great reasons to choose an LLP, and also some significant draw backs in choosing this structure.
  • LLP means Limited Liability Partnership. It is a separate legal entity and business organisation that gives the benefit of limited liability of company and the flexibility of a partnership. LLP is new form of business entity with limited liability.
  • Limited Liability Partnership not only gives the benefits of limited liability at low compliance cost but allows its partners the flexibility of organising their internal structure as a traditional partnership. LLP will be liable for the full extent of its assets and the liability of partners will be limited.
  • LLP is called a hybrid between a company and partnership. LLPs are governed by Limited Liability Partnership Act 2008 and the Ministry of Corporate affairs, and the Registrar of Companies (ROC) are entrusted with the task of administering the LLP act 2008

2. Key Features of Limited Liability Partnership (LLP)

  • Limited liability protects the member's personal assets from the liabilities of the business. LLP's are a separate legal entity to the members.
  • Flexibility: The operation of the partnership and distribution of profits is determined by written agreement between the members. This may allow for greater flexibility in the management of the business.
  • The LLP is deemed to be a legal virtual person. It can buy, rent, lease, own property, employ staff, enter into contracts, and be held accountable, if necessary.
  • Corporate ownership: LLP's can appoint two companies as members of the LLP. In a LTD Company, at least one director must be a real person.
  • Designate and non-designate members: You can operate the LLP with different levels of memberships.
  • Protecting the partnership name: By registering the LLP at Companies House you prevent another partnership or company form registering the same name.

3. Small LLPNEW

There is a new concept of small LLP introduced by LLP (Amendment) Act,2021. Small Limited Liability partnership means a LLP

  1. Whose Contribution does not exceed Rs 25 lakhs or such higher amount which could be increased by Government upto maximum of Rs 5 Crores
  2. Whose Turnover in previous financial year does not exceed Rs 40 lakhs or such higher amount which could be increased by Government upto Rs 50Crores

The purpose of Small LLP is to reduce the compliance burden, reduce the normal fees, reduce the penalty for non-compliance and eliminating the need for a professional signatures. All LLP and ROC documents form "Small LLP" can be done through self certification of the designated partner(s) of the LLP.

4. Steps to Register a Limited Liability Partnership (LLP)

While EZTax.in will take care of the entire process in registering a company, below are few steps to understand the process.

  • Obtain Digital Signature Certificate [DSC] for the proposed Director(s).
  • Obtain Director Identification Number [DIN] for the proposed director(s).
  • Select suitable Company Name, and make an application to the Ministry of Corporate Office for availability of name.
  • New User Registration
  • Payment of Requisite fee to Ministry of Corporate Affairs [MCA] and also Stamp Duty.
  • Incorporate a LLP : Once the name is approved, the user has to file form FiLLiP with partners details, registered place of business, Contribution percentage, objectives of business etc. This form needs to be filled with MCA by paying applicable fees
  • File LLP Agreement : Once the LLP incorporation is done, LLP Agreement is required to be filed with the registrar in e form 3 within 30 days of Incorporation of LLP

5. Advantages of LLP

The following are the advantages of forming LLP

  • LLP is organized and operates on the basis of an agreement
  • It provides flexibility without imposing detailed legal and procedural requirements
  • LLP is easy to form
  • All partners of LLP enjoys Limited Liability
  • LLP has flexible capital structure
  • LLP has less compliance cost

6. LLP Annual Compliance

1. Annual Return (Form 11)

What is it?

Every LLP should file Annual Return within 60 days from the closure of financial year. It must be signed by the designated partners of LLP.

The Due date for filing Annual Return (Form 11) is May 30th every year . Refer Tax Compliance Calendar for the latest.


Note: If the turnover of LLP exceeds Rs 5 Crores or contribution of partners of LLP exceeds Rs 50 Lakhs, Form 11 should be certified by Company Secretary in full time practice

Normal Filing fees for Form 11

S.NoContribution Amount (INR)Normal Fee applicable (INR)
1Up to 1,00,00050
2More than 1,00,000 up to 5,00,000100
3More than 5,00,000 up to 10,00,000150
4More than 10,00,000 up to 25,00,000200
5More than 25,00,000 up to 100,00,000400
6More than 100,00,000600

Penalty:

The Penalty for non-filing of Form 11 is Rs 100 per day till 31st Mar 2021. w.e.f 01st Apr 2022, Late fee for LLP Compliance has been reduced as follows

S.NoPeriod of delayAdditional fee payable
Small LLPs (INR)for Other than Small LLPs (INR)
1Up to 15 days1 times of normal filing fees1 times of normal filing fees
2More than 15days and up to 30 days2 times of normal filing fees4 times of normal filing fees
3More than 30 days and up to 60 days4 times of normal filing fees8 times of normal filing fees
4More than 60 days and up to 90 days6 times of normal filing fees12 times of normal filing fees
5More than 90days and up to 180 days10 times of normal filing fees20 times of normal filing fees
6More than 180 days and up to 360 Days15 times of normal filing fees30 times of normal filing fees
7Beyond 360 days25 times of normal filing fees50 times of normal filing fees


2. Statements of Accounts and Solvency (Form 8)

Form 8 should be filed within 30 days from the end of 6 months from the end of Financial year. Form 8 consists of 2 parts ie.. Part A- Statement of Solvency and Part B-Statement of Accounts, Statement of Income and Expenditure. Form 8 Should be signed by the designated partners and it should be certified by Chartered Accountant, auditor or accountant of LLP.

The Due date for Form 8 is 30th Oct every year. Refer Tax Compliance Calendar for the latest.


Normal Fees for filing Form 8

S.NoContribution Amount (INR)Normal Fee applicable (INR)
1Up to 1,00,00050
2More than 1,00,000 up to 5,00,000100
3More than 5,00,000 up to 10,00,000150
4More than 10,00,000 up to 25,00,000200
5More than 25,00,000 up to 100,00,000400
6More than 100,00,000600

Penalty: The Penalty for non-filing of Form 8 is Rs 100 per day till 31st Mar 2021. w.e.f 01st Apr 2022, the late fee for LLP Compliance has been reduced as follows

S.NoPeriod of delayAdditional fee payable
Small LLPs (INR)for Other than Small LLPs (INR)
1Up to 15 days1 times of normal filing fees1 times of normal filing fees
2More than 15days and up to 30 days2 times of normal filing fees4 times of normal filing fees
3More than 30 days and up to 60 days4 times of normal filing fees8 times of normal filing fees
4More than 60 days and up to 90 days6 times of normal filing fees12 times of normal filing fees
5More than 90 days and up to 180 days10 times of normal filing fees20 times of normal filing fees
6More than 180 days and up to 360 Days15 times of normal filing fees30 times of normal filing fees
7Beyond 360 days15 times of normal filing fees plus Rs.10 per day for everyday delay beyond 360 days30 times of normal filing fees plus Rs.20 per day for everyday delay beyond 360 days

3. Director KYC

Every Designated partner of LLP must file Director KYC every year before Sep 30th. In case a DIN is de-activated, the penalty for re-activation of a DIN is Rs 5000.


4. Income Tax

Every LLP should file the Income Tax Return in ITR 5 every year. The due date for filing Income tax returns for LLP's (Non Audit) is July 31st and LLP (Audit) is Sep 30th


5. Audit

Audit is required for LLP's whose contribution exceeds Rs 25 lakhs or whose turnover exceeds Rs 40 lakhs per year


Maintenance of Books of Accounts: The LLP should maintain such proper books of accounts like Bank book, cash book, ledgers, expenses , incorporation certificate, Annual returns etc which is related to its affairs for each year of its existence at its registered business place on case basis or accrual basis

Rates of Income applicable to Limited Liability Partnership (LLP): LLP's are required to pay flat 30% on total Income (profit). Surcharge @ 12% is levied if the LLP total income exceeds Rs 1 Crore.

Example: Let's Consider the following example with 2 income slabs

Tax TypeTotal Income is 10 lakhsTotal Income is 1 crore
Income TaxRs. 3,00,000Rs. 3,00,0000
SurchargeRs. 0Rs. 3,60,000
Education cess @ 4%Rs. 12,000Rs. 1,34,400
Total Income TaxRs. 3,12,000Rs. 34,94,400

7. FAQs

1.How to convert existing partnership firm into LLP?

Any existing partnership firm that is willing to get converted into LLP will need to apply through Form 17 (Application and statement for the conversion of a firm into LLP. Form 17 needs to be filed along with Form 2 (Incorporation document and Subscriber's statement).

2.How to convert an existing private company/ unlisted public company into LLP?

Any private company/ unlisted public company that is willing to get converted into LLP need to apply through Form 18 (Application and Statement for conversion of a private company/ unlisted public company into limited liability partnership (LLP)). Form 17 needs to be filed along with Form 2 (Incorporation document and Subscriber's statement).

3.How to start a Foreign Limited Liability Partnership (FLLP)?

Any Foreign LLP can establish its place of business in India by filling Form 27 (Registration of particulars by Foreign Limited Liability Partnership (FLLP)).

The eForm has to be digitally signed by authorized representative of the FLLP.There is no mandatory requirement to apply and obtain DPIN or DIN for Designated Partners of FLLP but the DSC of the authorized representative is mandatory.

4.What are the qualifications for becoming a partner?

Any individual or body corporate may be a partner in a LLP. However an individual shall not be capable of becoming a partner of a LLP, if—

  1. he has been found to be of unsound mind by a Court of competent jurisdiction and the finding is in force;
  2. he is an undischarged insolvent; or
  3. he has applied to be adjudicated as an insolvent and his application is pending.
5.What are the requirements in respect of "Designated Partners"?

Appointment of at least two "Designated Partners" shall be mandatory for all LLPs. "Designated Partners" shall also be accountable for regulatory and legal compliances, besides their liability as ‘partners, per-se".​

6.Who can be a "Designated Partner"?

Every LLP shall be required to have atleast two Designated Partners who shall be individuals and at least one of the Designated Partner shall be a resident of India. In case of a LLP in which all the partners are bodies corporate or in which one or more partners are individuals and bodies corporate, at least two individuals who are partners of such LLP or nominees of such bodies corporate shall act as designated partners.

7.What is the minimum and maximum number of members required for formation of LLP?

The minimum number of partners required to form LLP is 2 members and there is no limit for maximum number of partners.

8.What is the liability of partners in LLP ?

The Liability of partners is limited to the extent of agreed contribution except in case of intention is wilful fraud

9.Can the Foreign Nationals become partner in LLP?

Yes, Foreign Nationals can become partners on LLP

10.Can the Minor become partner of LLP?

No, the Minor cannot be admitted as partners of LLP.

11.What is the difference between LLP and Partnership Firm?

There are several differences between LLP and Partnership Firm

  1. Separate Legal Entity: LLP has separate legal entity where Partnership Firm don't have any separate Legal entity
  2. Registration: LLP registration is mandatory where it is optional for partnership Firm
  3. Liability: Liability of each partner is limited to the extent of agreed contribution whereas In partnership, Liability of partners is unlimited
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