Compliance is a process of filing certain forms or information to the central government as the statutory requirement. Compliance follows the principle of maintenance where you need to spend some money to maintain. The company is liable to certain compliance which needs to be completed with a month from Date of Incorporation.
It helps the entrepreneur to do business with comfort and ease. Registered LLP needs to file Annual returns and statement of account for each financial year. Returns are mandatory to be filed whether doing any Business.
There are basically three mandatory compliance requirements to be followed by LLPs.
Filing Annual Return
Annual Return or Form 11 is a summary or an indication of any change in the management. The annual return should be filed in Form 11 to the Registrar within 60 days from the closure of a financial year.
Filing Annual Accounts or Statement of Accounts or P&L and Balance Sheet
Books of Accounts are maintained in LLPs through Double Entry System. LLPs also need to prepare a Statement of Accounts every year ending on 31st March.
In some cases, LLPs should file Form 8 with the Registrar of Companies on or before 30th October every year.
Form 8 is applicable to the LLPs registered till 30th September 2015.
In case registration after 1st October 2015, the Annual Statements should be filed in 2017.
LLP seal is required to open a bank account and for application of PAN. Hence LLP should have two rubber seals around with LLP name and LLP name with designation can be purchased on Incorporation of the company.
Letter Head is an important stationary. There are some other documents which are required official documents and invoice.
Books of Account maintenance is a requirement of every LLP. It can be maintained manually as well electronically (Tally or QuickBooks).
LLP Bank Account opening
Limited liability partnership is firm with Limited liabilities. LLP is one of the newest kind of firm. It is a unique type of firm which gives the opportunity of ‘partnership’ and ‘company’ in a single business entity.LLP was introduced under Limited Liability Partnership Act, 2008. LLP is superior than the Partnership firm. In LLP there is an option of raising equity by which chances fundraising decreases in Start-up.
In LLP must have at least two designated partners in these one must be Citizen as well as the resident of India. NRI and Foreign national mainly invest in the private limited company. Since, it is allowed to have 100% FDI under the automatic route. In India, the Government has now allowed 100% FDI in LLP under the automatic route.
Requirement for Filing the agreement
Digital Signature Certificate should be obtained by the all proposed partners and the proposed partners of the LLP. After DSC, partners required to obtain DPIN (Designated Partner Identification Number).Documents must be signed by Foreign Nationals and NRI copy of documents attached to it.
Documents to be attached for Foreign Nationals are:
All the Documents are to be notarized by the authorized professionals.
Documents required for foreigners residing in India
Once the DIN is obtained, an application for reservation of name of LLP is made with the Ministry of Corporate Affairs (MCA). There need to be six options for names. It must not be generic and needs to have the distinct & unique structure according to the MCA regulations. After approval of name, the application for incorporation made within 60 days.
LLP Registration Process for NRI and Foreign Nationals
LLP application can be filed by the partners with MCA along with the required documents including the subscribers sheet. After satisfaction that all the requirement of incorporation of LLP has been duly complied as per the provision of LLP Act 2008, the registrar of companies shall issue the Certificate of Incorporation and after getting COI the partners can commence their business.
Filing LLP Agreement
LLP agreement must be duly signed and filed by the partner within 30 days if the agreement is not filed within the period of 30 days, it may attract the heavy penalty on the partners who are liable for such default.
How can Foreign National and NRI register an LLP?
In India, LLP registration started in 2008. This has become quick and popular amongst small businesses owing to the low registration cost and lesser compliance requirement as compared to a private limited company.
India Entry for NRIs and Foreign Nationals
Company Incorporation is the most preferred entry strategy in India for NRIs and Foreign Nationals. This is because 100% FDI under the automatic route which has been the main reasons for the popularity of private limited company amongst NRIs and Foreign Nationals.
LLP Registration and investment in India was a cumbersome process before November 2015.Due to this company registration was preferred over LLP registration by NRIs and Foreign Nationals. But, after the relaxation of FDI norms in November 2015, it is easy to register LLP by NRIs and Foreign Nationals. This is considered an ideal investment vehicle for establishing a small business in India with FDI policy.
The opening of Branch Office requires an approval from RBI. In this case, only well-established businesses having good track record in terms of financials are allowed to open a branch office in India.
Limited Liability Partnership is a business firm with limited liability. LLP is giving you the advantage of ‘Company’ and ‘partnership’. LLP was passed under limited liability partnership act, 2008.This type of firm is superior to the partnership. In this case single person is not responsible for any misconduct. LLP do not have the concept of shared capital but the contribution of partners.
LLP is a unique form of Business in which partners are limited to their capital contribution.LLP requires fewer compliance formalities. Business is flexible because partners can decide how they will individually contribute to the business operations.LLP is beneficial because no tax is levied on a distribution of profits amongst the partners.
Duties and Rights of the partner in LLP
Authority of partners
Ministry of Corporate affairs is an Indian ministry that is primarily concerned with Companies Act, 2013, Companies Act, 1956, Limited Liability partnership act 2008 and other rules and regulations. The responsibility of this Ministry is regulation of Indian enterprises in Industrial and Services sector.
Companies can be registered in India
Private Limited Company-It is the type of company recommended for Business. The cost of registration of the private limited company is cheaper than other forms of a company. Private limited should have a minimum of 2 members and can have maximum 200 members. In this company liabilities are limited and it has some features of a partnership.
People mostly prefer this of the company for fundraising. The degree of operation and ownership can easily separate in this type of company. Business can be exited without any hassle. In this members are limited to only contribute towards a number of shares.
One Person Company-It is the type of company which can be started by a Single member.OPC is the latest form of company in Companies Act, 2013. One person can become the director as well as the shareholder. Similar to the private limited company as the degree of operation and ownership are on the separate basis.
OPC gives wings in the hand of Sole proprietor to form the company under with full control. It is done without any interference of the third person. This type is easy for an entrepreneur to directly target the market. Fundraising from banks and the financial institution is easy. People who are Indians and resident in India can form OPC.
Public Limited Company-This is a publicly held company. A large amount of capital investment can easily be obtained. These types companies are considered to be a more transparent business model as compared to other business structures. Investors get the choice of transferring their ownership in the company without any hassle by just selling the shares.
Section 8 Company-These companies are basically formed to encourage arts science, sports, education, research, social welfare, religion, charity, etc. These kinds businesses do not play any vital role in profit. Company Intends to prohibit the payment of any dividend to its members. These companies are the non-profit making company.
Section 8 company was incorporated mainly for welfare purposes. Previously, it was defined as Section-25 Company. Due to commencement of Companies act, 2013 it was called as Section-8 Company
Nidhi Company- Nidhi Company comes from the Hindi word ‘Nidhi’ means fund. These are the NonBanking financial corporation. These are also known as mutual benefit funds. Nidhi company is known in the corporate scenario is member benefits company. Companies are formed for the welfare of the members and to increase saving habits.
Other types of Companies
There are some more types companies which can be registered in India.
Limited liability and Sole Proprietorship are the two different aspects of business .Before starting any business an entrepreneur should keep in mind what should he/she prefer so that his/her business grow positively.
Here are some points which help you to define difference between LLP and Sole Proprietorship
Limited liability partnership is a business entity in which partners have limited liability and have a separate legal entity.LLP also provides the flexibility of internal structure .Any misconduct in the business is not the responsibility of one person .
Minimum 2 members are compulsory and Maximum 20 members can be there.
Sole Proprietorship, only one person can be the member and it does not have a separate legal entity. There is no legal distinction between business and the Owner. Owner is responsible for all losses and profits.
Choice of Name
In LLP promoters can provide the name and get it approved by the Registrar of the Company. Approval is given to only those name which are non-objectionable.
Sole Proprietorship names can be chosen by promoters .No approval is needed regarding usage of the name. But it is preferred to avoid trademark names.
LLP has to be registered with Registrar of Company and Certificate of Incorporate has to be issued.
Sole Proprietorship, there is no need of Registration. A sole proprietorship does not require any formality which is there in the LLP. Business can be opened whenever owner wants.Sole proprietorship requires less paperwork.
In LLP foreign nationals can take part in a partnership which follows RBI guidelines. In these, at least 1 member has to be Indian Resident.
In Sole Proprietorship there are no such made regarding participation .
LLP was passed under partnership act 2008 which contains all the rules and regulations.
In Sole Proprietorship needs no act has been passed.
LLPs tax rates are charged 30 % in addition to the service charge.
In Sole Proprietorship tax slabs are applicable according to the personal income.
Control and liability
LLP is organized in according to the state laws. LLPs have control over business management in partnership.Task and obligations are divided based on the partnership agreement. The agreement includes the division of costs and profits. this type of business entity helps shield the owners' personal assets from attachment to satisfy debts of the business.
In Sole proprietor person has complete management control over business.
In LLP firm is audited if there is a contribution of 25,00,000 and turnover crosses 40,00,000
In Sole Proprietorship, an audit is not applicable.
In LLP business partners frame their business idea and then apply all the formalities required for DSC-Digital Signature Certificate, DIN-Director Identification Number, Consent letter and subscription letter.
These formalities are not required Sole Proprietorship Business.
A Private Limited Company and Limited Liability Partnership (LLP) have different features and entrepreneurs chose the business structure suiting their needs and other aspects.
It is good to compare Private Limited Company and LLP for entrepreneurs keen to start a new venture.
A Private Limited Company or famously known as LTD is a privately held Company. Whereas LLP, which is limited liability partnership, is a company where all partners have limited liabilities. Here, one partner is not responsible for other partners’ diligence or negligence.
In both the Companies, the minimum requirement of 2 Partners is mandatory
The registration process for Private Limited Company and LLP is similar and are registered with the Ministry of Corporate Affairs. However, the registration cost for LLP is significantly cheaper than the cost of incorporation of Private Limited Company.
In a Private Limited Company, the liability of shareholders is limited to their shares. Financial risks are a part of business but to be able to minimize them and sustain the business progress is imperative. In an LTD, if due to any reason the company were to be closed the shareholders would not risk losing their personal assets. The liability of partners in LLP is limited to the amount of capital invested and there is no minimum limit to the amount of capital to be invested.
Private Limited Companies are incorporated; hence it continues to exist even if the owner dies. Similarly, the existence and running of LLP does not solely depend on either of the partner. The partners of an LLP may keep changing from time to time and it will not affect the LLP’s continuity.
Private Limited Companies ownership is determined by its shareholding and the number of shareholders allowed is up to 200. However, in an LLP, the Partners hold the ownership of and manage the LLP.
Both Private Limited and LLP offer transferable features, however a Private Limited is more flexible to transferring or sharing of ownership.
An LLP enjoys more freedom from rules put down by the Ministry of Corporate Affairs. Private Limited Company has to file financial statements with the Ministry each year, whereas it may not be the case with an LLP if the annual turnover is less than 40 lakhs and capital contribution is less than 25 lakhs.
Despite the aforementioned similarities and differences, a Private Limited Company is a much more popular choice among entrepreneurs. Overall, a Private Limited Company offers better stability and features than an LLP.
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