This article provides a detailed overview of the legal requirements involved in forming, operating, and maintaining an LLP in India.

1. Understanding LLP: Key Features

Before diving into legal requirements, it’s important to understand what sets LLPs apart:

• Separate Legal Entity: An LLP has its own legal identity, separate from its partners.

• Limited Liability: Partners' liability is limited to their agreed contribution.

• No Minimum Capital Requirement: There is no mandatory capital threshold.

• Flexibility in Management: The internal structure is governed by an LLP Agreement.

• Perpetual Succession: The LLP continues to exist irrespective of changes in partners.

2. Formation and Registration Requirements

a. Partners and Designated Partners

• Minimum Partners: At least two partners are required to form an LLP.

• Designated Partners: Out of the total, at least two must be Designated Partners, and at least one must be a resident in India.

• Eligibility: Individuals and corporate bodies can be partners; minors, undischarged insolvents, and persons of unsound mind cannot be.

b. Obtaining Digital Signature Certificates (DSC)

Every designated partner must obtain a Digital Signature Certificate (DSC) to sign electronic documents filed with the Ministry of Corporate Affairs (MCA).

c. Director Identification Number (DIN/DPIN)

Designated Partners must also apply for a Designated Partner Identification Number (DPIN) or DIN, which is a unique identification number issued by the MCA.

d. Name Reservation

• The proposed LLP name must be unique and not identical or similar to an existing company, LLP, or trademark.

• 
  File Form RUN-LLP on the MCA portal for name approval.

e. LLP Agreement

• An LLP Agreement governs the rights and duties of partners.

• It must be filed within 30 days of incorporation using Form 3.

• If no agreement is filed, the First Schedule of the LLP Act, 2008 applies by default.

f. Incorporation Filing

• Submit Form FiLLiP (Form for Incorporation of LLP) online along with required documents:

  • Identity and address proof of partners

  • Registered office proof

  • Consent of partners

  • Subscriber sheet

• Once approved, a Certificate of Incorporation is issued by the Registrar.

3. Post-Incorporation Compliance

a. PAN and TAN

After incorporation, the LLP must obtain:

• PAN (Permanent Account Number)

• TAN (Tax Deduction and Collection Account Number) from the Income Tax Department.

b. Opening a Bank Account

A current bank account must be opened in the LLP’s name using the incorporation documents and PAN.

c. GST Registration (if applicable)

If the LLP's turnover exceeds ₹20 lakh (₹10 lakh in special category states), or it engages in interstate supply or e-commerce, it must register under GST.

4. Annual Compliance Requirements

Unlike companies, LLPs enjoy a relatively relaxed compliance regime. However, some essential filings must be made annually:

a. Statement of Account and Solvency (Form 8)

• Must be filed within 30 days from the end of six months of the financial year (i.e., by October 30).

• Includes a declaration on the solvency of the LLP and financial statements.

b. Annual Return (Form 11)

• Filed within 60 days of the financial year-end (i.e., by May 30).

• Contains details of partners and changes during the year.

c. Income Tax Return

• LLPs must file income tax returns by July 31 if audit is not required, and by October 31 if it is.

d. Audit Requirements

• Audit is mandatory only if:

  • Annual turnover exceeds ₹40 lakh, or

  • Contribution exceeds ₹25 lakh.

5. Event-Based Compliance

LLPs must also comply with various filings in case of specific events:

6. Penalties for Non-Compliance

Non-compliance with statutory requirements can attract significant penalties:

• Form 8 or 11 late filing: ₹100 per day per form without any upper limit.

• Failure to file LLP Agreement: Default provisions apply, and penalties may be levied.

• Non-compliance with Income Tax: Attracts interest, penalties, and even prosecution for willful evasion.

Additionally, continuous non-compliance may result in:

• Deactivation of DINs of designated partners

• Disqualification from forming another LLP

• Strike-off of LLP from the register

7. Other Legal Obligations

a. Maintaining Statutory Records

LLPs must maintain:

• Books of accounts

• Records of partners

• Minutes of meetings (if any)

• A register of charges (if applicable)

b. Contracts and Licenses

Depending on the nature of business, additional licenses may be required:

• Shops and Establishment License

• Import Export Code (IEC)

• Professional Tax Registration

• Trade License, FSSAI, etc.

8. Foreign LLPs and FDI

Foreign LLPs can also establish a presence in India, but with restrictions:

• FDI in LLPs is allowed under the automatic route in sectors where 100% FDI is permitted and there are no FDI-linked performance conditions.

• Foreign LLPs must comply with FEMA regulations, appoint a designated partner in India, and file Form 27 for registration with the ROC.

Conclusion

The LLP structure offers a flexible, low-compliance business form for entrepreneurs, consultants, and professionals in India. While the compliance burden is lighter than that of private limited companies, it is by no means negligible. Timely filing, maintaining updated records, and fulfilling tax obligations are critical to avoiding penalties and ensuring smooth business operations.

Whether you’re starting a new LLP or managing an existing one, staying informed and compliant with the law is essential for long-term success.