Who are eligible for LLP?
Who are eligible for LLP?
Limited Liability Partnership (LLP) is an alternative business structure in India that offers the advantages of both a partnership organisation and a private limited corporation. The Limited Liability Partnership Act of 2008 governs LLPs, which must be registered with the Ministry of Corporate Affairs. Unlike a traditional partnership firm, the partners in an LLP have limited liability, which means that their assets are not at risk in case of any penalties or losses incurred by the LLP. This article will discuss who is eligible for LLP in India.
What is the concept of LLP in India?
A Limited Liability Partnership (LLP) is a type of business organisation that combines the advantages of a corporation and a partnership. It is a preferred business model for many small and medium-scale businesses in India. Limited Liability Partnerships are legally distinct from their partners and provide the partners with limited liability. This means that the partners’ personal assets are not at risk in the event of a business failure.
An LLP has at least two partners and a maximum of 200 partners. All partners are required to contribute to the capital of the company. Partners are liable for business debts, but only to the extent of their contribution. To be eligible to form an LLP, the partners must be citizens of India or a corporate body established in India. The partners must be 18 years of age or above and have the capacity to enter into a contract. The partners must also have the necessary skills, experience, and knowledge to manage the business.
The partners must also have the financial resources to contribute to the company’s capital.
Who are eligible for LLP in India?
- Indian Citizens and Resident Indians: To form an LLP in India, at least two individuals or companies must act as designated partners. Any Indian citizen or resident Indian can become a designated partner in an LLP.
- Foreign Nationals and Foreign Companies: Foreign nationals and foreign companies can also become partners in an LLP in India. However, they must comply with specific requirements, such as obtaining a digital signature certificate and a Director Identification Number (DIN). In addition, foreign nationals and foreign companies need to obtain necessary approvals from Reserve Bank of India (RBI) and Foreign Investment Promotion Board (FIPB) if they want to invest in an LLP.
- Non-Resident Indians (NRIs): Non-Resident Indians (NRIs) are also eligible to form an LLP in India. NRIs can become designated partners in an LLP and must comply with the same requirements as Indian citizens and resident Indians. However, NRIs must ensure that the funds invested in the LLP are received from their NRE or FCNR account.
- Limited Liability Partnerships (LLPs) and Companies: LLPs and companies can also become partners in an LLP in India. However, an LLP cannot become a partner in another LLP and a corporation registered as a company under Section 8 of the 2013 Companies Act cannot join as a partner in an LLP.
- Designated Partners: Designated partners are individuals who are responsible for managing the affairs of the LLP. In India, any LLP must have two authorised partners who are persons and at least one of them must be an Indian citizen. The designated partners need to obtain a Director Identification Number (DIN) and digital signature certificate (DSC) to sign the documents filed with the Registrar of Companies (ROC).
In conclusion, LLPs provide several advantages like restricted liability, tax advantages and convenience of conducting business. An LLP can have as partners any citizen of India or resident Indian, foreign national or foreign corporation, NRI, LLP or firm, and specified partners. However, they must adhere to specific guidelines and secure the required approvals from the relevant authorities. Therefore, consulting with a professional before registering an LLP in India is essential.
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