Understanding The Costs Involved In An LLP Registration

One of the business structures in India is an LLP – Limited Liability Partnership. It does not have any directors and shareholders but has partners who can share the profits and losses of the business. An LLP offers benefits like the partners’ limited liability, which means the partners are not responsible beyond their contributions. It provides the benefits of both a company and a partnership.

In India, an LLP is regulated by the Limited Liability Partnership Act, of 2008. It exists as a separate legal entity but the LLP has to be registered to get the benefits. An LLP has to be registered with the Ministry of Corporate Affairs (MCA). There are various costs associated with registering an LLP in India.

If you want to register your LLP then you will need a minimum of 2 partners and one of the partners has to be a resident of India. Any number of people can be partners in an LLP. In an LLP the capital invested can be of any amount. However, an LLP can be created to do lawful business and earn profits. 

Cost of registering an LLP

The cost of registering an LLP varies as per the state where the LLP is being registered, the number of partners involved and services taken from professionals. The main costs involved are:

1. For registering your LLP it is better to seek help from professionals such as chartered accountants or company secretaries. The fees depend on the complexity of the process and the services required.

2. The registration fees depend on the authorised capital of the LLP. If the authorised capital of an LLP is Rs. 1 lakh then the registration fee is Rs. 500. For an authorised capital between Rs. 1 lakh – 5 lakh the registration fee is Rs. 2000. As the authorised capital increases the fees increases. For an authorised capital between Rs. 5 lakh – 10 lakh the registration fee is Rs. 4000. For an authorised capital above Rs. 10 lakh the fee is Rs. 5000. 

3. The LLP agreement has to be printed on non-judicial stamp paper and stamp duty has to be paid depending on the state where the LLP is to be registered.

4. Other expenses include the fee for obtaining digital signatures, getting PAN and TAN numbers for the LLP, drafting a Memorandum of Association (MoA) and opening a bank account. There is a fee for registering a LLP agreement within 30 days of registration and if late then a fee of Rs. 100 per day is charged.

Benefits of an LLP

1. An LLP exists as a separate legal entity and it has its property, can get into contracts, borrow money, sue and also get sued in court. The existence of an LLP does not depend on its partners. An LLP needs only one partner to operate and even if the other partners quit or expire it will continue. The remaining partner can find the other partners within six months.

2. In case the business fails then an LLP will protect its partners and they will not lose their personal property. The partners are responsible only for the money they invest in the LLP and not the entire loss. LLP is a more safer and secure way of doing business. In traditional partnerships, the owner and the partners have to pay for business losses from their earnings.

3. An LLP has low registration and compliance costs. The total cost of LLP registration is less when compared to a Public or Pvt. Ltd. company. Companies have to follow rules and regulations but an LLP does not have to. In an LLP you have to file only 2 forms yearly –  the statement of accounts and solvency and the annual report. In an LLP the accounts need not be audited unless the contributions exceed a certain limit.

4. The profits of an LLP are charged only once which is at the LLP and not at the partners. Therefore the partners can take their share of profits without paying any tax. 

5. As the LLP does not have to go by the rules and regulations set for companies therefore it involves less worrying about and less paperwork. Unlike a company, you do not need a huge sum to start an LLP.