Business Formation Law Firm in India
Establishing a Limited Liability Partnership in India
A Limited Liability Partnership (LLP) is a hybrid between a partnership firm and a limited liability company. It provides the flexibility of a partnership at the same securing the partners with the concept of limited liability. The LLP is a separate legal entity distinguishable from its designated partners. The partners’ liabilities are limited only to their extent of their agreed contribution.
The Limited Liability Partnership Act, 2008 governs the rules and procedures for the formation of an LLP, besides other legal aspects relating to an LLP.
Salient Features of an LLP
- Separate Legal Entity
An LLP is a distinct legal entity, separate from its partners, allowing it to own property, enter into contracts, and sue or be sued in its own name.
- Limited Liability
Partners’ liability is limited to their agreed-upon contribution to the LLP, protecting their personal assets from business debts and obligations.
- Perpetual Succession
The LLP continues to exist even if partners change due to retirement, death, or other reasons.
- Reduced Compliance
Compared to companies incorporated under the Companies Act, 2013, LLPs generally have fewer compliance requirements and regulatory burdens.
- Designated Partners
Every LLP must have at least two designated partners who are individuals and at least one of whom is a resident of India.
- LLP Agreement
The LLP Act allows partners to define their mutual rights and obligations through a comprehensive LLP agreement.
- Transferable Ownership
Ownership interests in an LLP can be easily transferred, subject to the terms of the LLP agreement.
- Taxation
LLPs are taxed as partnerships, meaning profits are taxed at the partner level rather than being subject to corporate tax.
Foreign Direct Investment (FDI) in LLP
Foreign companies can seek to establish their business in India in the form of an LLP. One hundred percent FDI is permitted in an LLP in all business sectors which fall under the automatic approval route. Hence foreign companies can incorporate the LLP, without seeking any prior approval from the Government of India.
Foreign companies intending to do business through the form of an LLP in business sectors, requiring the approval route, must first approach the Government of India for the requisite approvals before establishing their LLP in India.
FDI in LLPs is not permitted in the prohibited sectors.
We advise and assist in the formation of a Limited Liability Partnership (LLP).
