Introduction
Limited Liabilities Partnership (LLP) is a popular business structure that has the amalgamation of both Partnership and Corporation. It was introduced in India by the 7th Law Commission of India in 1957. LLPs are only available for those who are in the services like Accountant, Lawyers, Secretaries, Corporation etc. The Regulatory Act which is professionally controls and regulates the Professional conduct, governed professions are only eligible to form LLPs. The Ministry of Corporate Affairs described the need and the role of the LLP.
As a corporate body and legal entity, it has separate identity from its partners. In the light of this the LLP can fully expand its liability but the partners liability will be limited according to their contribution in the LLP.
Certificate of Registration for LLP
The Certificate of Registration for LLP is mandatory for the LLP and its partners. It is a protective shield which safeguards the partners from any unusual liabilities and screen their assets from the business debt and obligations. LLP can be involved in contracts as any legal person, it can possess assets and can carry out any business activities.
It is an official document which is issued by the Registrar of Companies (RoC), once Incorporation of the LLP is successfully completed.
The essentials of Certificate:
Ø LLP Identification Number
Ø Self-Declaration
Ø Name of LLP
Ø Date of Incorporation
Ø Stamp of Registrar of Companies
Advantages of Registration Certificate of LLP
1. Legal Status: It allows the LLP to own assets, sign contracts and take legal actions as a Legal Person.
2. Limited Liability: The Partners’ assets are secured via Limited Liability.
3. Flexible Management: LLP do not have rigid management structure.
4. Tax Advantages: Profits are distributed to partners and taxed at their individual income tax rates.
5. No Minimum Capital Requirement: No minimum capital is required to set up LLP, making it easy for the small business to establish.
6. Perpetual Succession: It continues to exist even if one or ac couple of partners are missing.
7. Enhanced Credibility: Registering LLP can enhance the credibility with the customers, suppliers and potential investors.
How to get LLP Certificate of registration
Procedure-
Step 1) Choose Unique name of LLP – must comply with the guidelines set by the Registrar.
Step 2) Obtain Digital Signature Certificate – required for the signing of digital certificate during registration.
Step 3) Apply for Director Identification Number (DIN) – Every partner must get the DIN by applying at Ministry of Corporate Affair (MCA).
Step 4) Draft the LLP Agreement- Contains the rights, duty and responsibility of the partners.
Step 5) Incorporation of LLP – Filling of Form for incorporation of limited liability Partnership (FiLLiP) at Ministry of Corporate Affairs.
Step 6) Submission of Documents – Documents along side FiLLiP to be submitted:
· PAN or ID proof of the partners
· Address and proof of residence
· Passport size photographs
· Foreign country partners must submit their Passports
· Foreign partners must submit their Address and residential proof
· Digital Signature Certificate (DCS)
Step 7) Registration fee payment- Registration fee must be paid according to the Ministry of Corporate Affair (MCA) criteria.
· Capital contribution up to Rs. 1 Lakh – Rs. 500 fees
· Capital Contribution between Rs. 1 Lakh and Rs. 10 Lakh – Rs. 2000 fees
· Capital Contribution between Rs. 5 Lakh to Rs. 10 Lakh – Rs. 4000 fees
· Capital Contribution exceeding Rs. 10,000 – Rs. 6000 fees
Step 8) Receive Registration Certificate – After the approval, the LLP will be officially registered.
Step 9) Apply for PAN and TAN – Necessary step post registration is to apply for Permanent Account Number (PAN) and Tax Deduction and collection account number (TAN).
Implications of Operating Without an LLP Certificate
Operating without LLP Certificate can be resulted in sever consequence for the Firm, such as:
1. No Legal Recognition: LLP will lose its legal status.
2. Fines and Penalties: Ministry of Corporate Affairs can impose fine.
3. Inability to Pursue Legal Action: Unregistered LLP cannot defend itself or initiate any lawsuit.
4. Loss of Credibility: Can be against the Business reputation.
5. Tax Compliance Problems: LLP might have difficulties in accessing tax benefits or meeting tax obligations.
Conclusion
The Registration Certificate if necessary for LLP because it recognize the entity as a distinct legal body, which is crucial for its operation. It also opens door to funding opportunities since financial institutions are more likely to lend to registered entities.
Hence, LLP registration can be beneficial for Tax as it can greatly improve their financial standing.