Minimum Capital Requirement For LLP Registration

Limited Liability Partnership (LLP) is a legal form of business organisation that provides the advantage of a partnership and a limited company at the same time. LLPs have greatly been embraced by the corporate world because of the various advantages like perpetual existence and; limited liability for the partners. If you're planning to register an LLP, one key question might arise: What is the amount of funds needed when starting the business? Understanding capital requirements is also significant for starting an LLP, in addition to the registration process and documents required to get started with a Limited Liability Partnership Registration are included in this blog.

What is a Limited Liability Partnership Formation?

An LLP is a form of company structure that provides limited liability provisions similar to a company combined with management and operational flexibility like that of a partnership. It lets partners run the company, but also protects the partners from being held legally responsible for the company or its debts. The LLP formation process also has very significant factors most notably the capital contribution needed. Minimum capital for LLP company registration is paid and at the end of this blog, we will follow the steps to register a company under this structure.

What is meant by the phrase Limited Liability Partnership or LLP?

An LLP partnership is a legal entity that enjoys legal recognition different from partners in the firm. Though the LLP itself is responsible for all the liabilities and all the losses incurred by it are borne by it, the partners of the LLP are absolutely liable for the extent of losses which does not exceed the amount of capital contribution agreed between them and the LLP. This means that nobody can be held liable for the actions of another partner and particularly for the actions that were carried out independently. Another advantage is; that partners are shielded from joint legal accountability for offences or negligence of the other partners.

The relationship of the partners of an LLP is regulated by means of an agreement which is also known as the LLP agreement. Information about the partners, their responsibilities, the allocation of the profits, the processes of decision-making, and other issues that define the operation of the partnership agreement are described in this document. While the LLP is legally responsible for the fulfilment of its obligations, it also has certain freedoms, such as the freedom to manage business and operational affairs, making it more feasible to choose an LLP Over a Partnership and it also has lesser regulatory restraints compared to a conventional firm.

Is LLP Registration Compulsory in India?

Yes, as per the LLP Act 2008, LLP Registration is compulsory if certain criteria are met. The Companies of this format are regulated by the Limited Liability Partnership Act, of 2008. Every LLP incorporated under the Companies Act operating in India is registered with the Registrar of Companies (ROC) for LLP Company Registration. All procedures are done online and various steps are taken to make sure that legal regulations are followed.

That is why the registration of an LLP provides the business formation with a particular legal entity that will not coincide with the partners. This is important because when an LLP is not registered, it will not be liable to all the protections offered by the law of limited liability. Besides, the LLP Registration is important to make sure that it’s officially recognized by the tax and regulatory bodies.

Minimum Capital Requirement Required to Set Up an LLP:

One of the critical elements and practices regarded to the LLP Company Registration is the capital contribution introduced as the business element. Unlike other types of business ventures like private limited companies, LLP Company Registration does not have a minimum capital requirement.

The Limited Liability Partnership Act, 2008 neither prescribes any limitation on the amount of paid-up capital to be contributed by the partners at the time of LLP formation. This feature, in turn, drives LLPs closer to the business concept since they can be registered with minimum amounts of capital agreed between the partners in the LLP agreement.

Here, as in the case of Limited companies, there is no stipulated minimum capital but the partners invest something called the partner’s capital during LLP Company Registration. This contribution can be in the form of:

• Tangible Containers (such as Machinery, and furniture).
• Turing it to real estate or movable property.
• Other non­current assets (such as Patents, trademarks, etc.,).
• Monetary contributions.

The advantage of such a structure is the freedom to determine the contribution of capital by the partners and the business needs and plans which can be provided in the LLP agreement.

LLP Company Registration In India: The procedure involved

Similar to any other business entity, an LLP in India forms a structured procedure hassle-free and easy. Below are step-by-step guidelines to get you through the LLP company registration process:

1. File for a DSC & DIN:

An LLP can be registered through company registration by following steps: Digital Signature Certificates (DSC) for designated partners. The partners will necessarily need a DSC to submit forms online. Furthermore, the partners of the firm must have a DIN, which is the unique identification number for a designated partner.

2. Choose and Approve LLP Name

The following step involves choosing the appropriate name of the LLP. The given name should fulfil the naming policies established by the Ministry of Corporate Affairs, MCA. The name is selected and once you have selected the name you have to ensure that the name you want appears on the MCA portal and apply for approval. After approval of the name, it is kept on hold for 20 days within which the LLP Registration must be conducted.

3. Draft LLP Agreement

There has to be a written legal document known as the LLP agreement which covers the terms of the agreement to help manage relations between partners. The record also includes information about the LLP’s working, business, earnings, distribution of profits, and decision-making procedures. This document has to be professionally written because it prescribes how the business is run on a daily basis.

4. File Incorporation Documents

In the case of Registration, the Essential Documents for LLP Registration have to be furnished by the partners to the MCA. The form employed for this use is Form FiLLiP (Form for Incorporation of Limited Liability Partnership). At the same time, it is obligatory to submit a subscribed application in which partners indicate how much they are willing to invest in LLP.

5. Pay the Registration Fees

The quantity of the registration fees of LLP depends on the capital that the partners actually bring. These fees have to be tendered online at the time of submitting the incorporation documents. It is not clear on the basis of partner contribution because the higher the partner’s contribution, the higher the fees charged.

6. Verification of Documents

After filing the documents, the MCA scrutinises them documents to ascertain that they fulfill the legal requirement. If there are differences the documents may require amendments to be made and, thus be resubmitted again. On completion of the verification process, another step of registration takes place.

Conclusion:

LLP formation in India helps the business get going with a special kind of corporate structure where the partners get the advantages of limited liability as well as operative freedom. Interestingly, LLP has no prerequisite capital control, meaning that any business entity can register for the LLP form of business. Through completion of the LLP Company Registration process as well as ensuring all the documentation is legal, there are numerous gains that follow the formation of an LLP.

If you want to register an LLP, Legal Raasta is your ideal destination. We provide professional service and help to follow all the regulations that exist for Company Registration.