Digital Signature Certificate (DSC)

How Much Does an LLP Cost in India?

The cost of LLP registration in India depends on multiple factors, including government fees, professional assistance, and other associated charges. Here’s a detailed breakdown of LLP registration fees:

1. LLP Registration Fees

The government fees for LLP registration are based on the contribution amount:

• For a contribution of up to ₹1 lakh: ₹500
• For a contribution between ₹1 lakh and ₹5 lakhs: ₹2,000
• For a contribution between ₹5 lakhs and ₹10 lakhs: ₹4,000
• For a contribution above ₹10 lakhs: ₹5,000

2. Digital Signature Certificate (DSC) Fees

At least one designated partner must obtain a Digital Signature Certificate (DSC) to sign and file documents online. Depending on the certifying authority, the cost of a DSC typically ranges from ₹2,000 to ₹4,000 per partner.

3. Professional Fees

While registering an LLP can be done independently, most entrepreneurs prefer to consult professionals (legal advisors or company secretaries) to ensure compliance. These fees can vary widely depending on the platform.

4. Stamp Duty Fees

Stamp duty is state-specific and varies based on the LLP’s contribution amount and the location of its registered office. On average, stamp duty can range from ₹500 to ₹5,000.

5. Name Reservation Fees

Reserving a unique name for your LLP costs ₹200 per application. This step ensures your chosen name complies with MCA guidelines.

{{llp-cta}}

Other Costs Involved in Registering an LLP in India

Apart from the mandatory registration fees, here are additional LLP registration charges to consider:

1. LLP Agreement Drafting Charges

Drafting the LLP agreement, which outlines the rights, duties, and profit-sharing ratios of the partners, typically costs between ₹2,000 and ₹10,000, depending on complexity and professional assistance.

2. Notarisation Charges

Once the LLP agreement is drafted, it needs to be notarised. The charges for notarisation depend on the contribution amount and the state in which the LLP is registered, averaging ₹500 to ₹2,000.

3. Late Filing Penalties

Timely filing of required forms is crucial to avoid penalties. For instance, the late filing fee for Form 3 (LLP Agreement) is ₹100 per day of delay. Budgeting for timely compliance ensures you avoid these avoidable costs.

Professional Legal Charges Involved in Registering an LLP in India

When setting up a business, time is of the essence, and navigating the registration process can be overwhelming, especially for first-time entrepreneurs. While the government fees for LLP registration are standardised, the professional fees for legal and compliance services can vary depending on your required scope of assistance.

Engaging a qualified professional may feel like an added expense initially, but it can save you significant time, stress, and potential errors in the long run.

Here’s why hiring a professional for your LLP registration is worth the investment:

• Drafting the LLP Agreement: The LLP agreement is more than just a legal document—it’s the backbone of your business operations. It defines the roles, responsibilities, profit-sharing ratios, and decision-making processes among partners. 
• Name Reservation Assistance: Choosing the right name for your LLP can be tricky. The Ministry of Corporate Affairs (MCA) has stringent guidelines to ensure uniqueness and avoid duplication.
• Digital Signature Certificate (DSC): A Digital Signature Certificate (DSC) is mandatory for designated partners to sign and file documents electronically during the registration process. Professionals assist in obtaining the DSC efficiently, ensuring you meet this requirement without delays.

At Razorpay Rize, we simplify the registration process by offering end-to-end support, covering everything from drafting agreements and obtaining DSCs to securing name reservations. 

{{llp-cta}}

Our LLP package includes:

• Company Name Registration
• Digital Signature Certificate (DSC) tokens
• DSC shipping & support
• Designated Partner’s Identification Numbers (DPIN)
• Certificate of Incorporation(COI)
• LLP Agreement
• Company PAN & TAN

With our team of experts managing the legalities, you can focus on building and growing your business confidently.

Frequently Asked Questions

Definition of Company Promoter

A company promoter is a person or entity that undertakes the responsibility of forming a company. As per legal definitions, a promoter is someone who conceives the idea of the business, takes the necessary steps to incorporate the company, and facilitates its registration.

For instance, if an individual drafts the Memorandum of Association (MOA) and Articles of Association (AOA) for a business and secures initial funding, they qualify as a promoter. Promoters can be:

• Individuals (e.g., founders of a startup)
• Groups of people (e.g., a partnership forming a company)
• Organisations (e.g., a holding company promoting a subsidiary)

Who Are the Promoters of a Company?

Promoters can be anyone involved in the process of establishing a company. This includes:

1. Founders – Entrepreneurs or individuals initiating the business idea.
2. Investors – Entities that fund the company’s formation and help in structuring.
3. Professional Firms – Companies that specialise in managing incorporation and initial stages.

It is important to differentiate between named promoters, whose roles are mentioned in legal documents like the prospectus, and unofficial contributors, who may assist without formal recognition.

Types of Promoters of a Company

Promoters can be classified based on their involvement and expertise:

1. Professional Promoters

These are specialists with expertise in company formation. For example, consulting firms or legal advisors assisting in setting up a company.

2. Occasional Promoters

Individuals who promote companies sporadically, typically when they spot a business opportunity, such as a seasoned entrepreneur launching a startup.

3. Financial Promoters

Entities like venture capitalists or investment firms promote businesses by providing initial funding.

4. Entrepreneurial Promoters

Business owners or founders who initiate the company based on their vision and strategy. An example is a tech founder creating a software startup.

Functions of a Promoter

The role of a promoter is multifaceted. Their primary functions include:

1. Identifying a Business Opportunity
   Promoters analyse market trends, identify viable opportunities, and decide on the scope of the business.
2. Preparing Necessary Documentation
   Drafting the MOA, AOA, and other legal documents essential for company registration.
3. Securing Capital and Initial Funding
   Approaching investors or institutions to raise funds for the company.
4. Registering the Company
   Ensuring the company’s incorporation by meeting all legal requirements, such as filing with the Registrar of Companies (RoC).
5. Establishing Operations
   Setting up offices, hiring the initial workforce, and laying out the operational roadmap.

Duties of a Company Promoter

Promoters have critical duties to uphold the integrity and governance of a company. These include:

1. Acting in Good Faith
   They must prioritise the company’s interests over personal gain.
2. Avoiding Conflicts of Interest
   Promoters are obligated to disclose any potential conflicts that may affect the company.
3. Disclosure of Personal Interests
   Any benefits or transactions involving the promoter must be transparently disclosed.
4. Providing Accurate Information
   Misrepresentation of facts during the company’s formation can lead to legal consequences.

Rights of a Promoter

Despite their duties, promoters are entitled to certain rights:

1. Right to Indemnity
   They can claim indemnity for liabilities incurred during company formation.
2. Right to Recover Preliminary Expenses
   Expenses made for incorporation can be reimbursed.
3. Right to Remuneration
   Promoters can receive remuneration for their services, either as cash or shares.

Liability of a Promoter

Promoters may face liabilities in specific scenarios:

• Civil Liability: Misrepresentation or breach of duties can result in compensation claims.
• Criminal Liability: Fraud or deliberate misconduct can lead to prosecution.
• Public Examination: Promoters may be publicly examined in cases of company insolvency.
• Personal Liability: They can be personally held liable for contracts signed before incorporation if the company does not ratify them.

Difference Between Promoters and Directors

Related Read - Who is a Director of a Private Limited Company?

Real-Life Examples of Famous Company Promoters

1. Dhirubhai Ambani (Reliance Industries)

Dhirubhai Ambani, the visionary founder of Reliance Industries, started the company in 1966 as a small polyester trading firm. Through his entrepreneurial spirit, he transformed it into a global conglomerate spanning petrochemicals, textiles, and telecommunications, making Reliance a household name in India.

2. Narayana Murthy (Infosys)

Narayana Murthy, the co-founder of Infosys, played a pivotal role in establishing one of India’s most successful IT companies in 1981. His commitment to transparency, innovation, and customer-centricity positioned Infosys as a global leader in software services and outsourcing.

3. Elon Musk (Tesla, SpaceX)

Elon Musk is a modern-day promoter known for revolutionising industries through Tesla and SpaceX. By promoting electric vehicles and renewable energy with Tesla and pioneering space exploration with SpaceX, Musk has demonstrated how visionary leadership can disrupt traditional industries and redefine the future.

Frequently Asked Questions

‍

Difference Between Company and Partnership Firm

A company and partnership difference is rooted in their legal definitions and formation processes. A company is an incorporated entity under the Companies Act, 2013, with shareholders owning the business. Conversely, a partnership firm is an unincorporated association of individuals governed by the Indian Partnership Act, 1932, where partners collectively own and manage the business.

Here's a table highlighting the main differences:

Looking to register your Limited Liability Partnership (LLP) effortlessly? Get started with Razorpay Rize today and streamline your business registration process!

Understanding a Company

Definition of Company

A company is a distinct legal entity formed by an association of people to carry on a business. The Indian Companies Act of 2013, Section 2(20), defines "company" as "a company incorporated under the Companies Act 2013 or any previous company law." Companies can be public or private, with private limited companies having 2-200 members and public companies having at least 7 members with no upper limit.

Types of Company

Here are the types of companies:

1. Private limited company: A privately held company with 2-200 members, where the transfer of shares is restricted.
2. Public limited company: A company that can invite the public to subscribe to its shares, with a minimum of 7 members and no upper limit.
3. One Person Company: A company with only one member.

Characteristics of a Company

• Separate legal entity
• Limited liability for members
• Perpetual succession
• Transferable shares
• Managed by Board of Directors
• Stringent compliance requirements

Company registration involves a formal process, including filing Memorandum and Articles of Association, obtaining DIN for directors, and submitting requisite documents to the Registrar of Companies.

Understanding a Partnership Firm

A partnership firm is a business structure where two or more partners come together to run a business collectively. The partners share the profits and bear the losses of the business in the agreed proportion.

Definition of Partnership Firm

A partnership firm is a business structure formed by an association of two or more people who agree to share business profits. The Indian Partnership Act of 1932, Section 4, defines Partnership as "The relation between persons who have agreed to share profits of business carried on by all or any of them acting for all."

Partnerships can be general partnerships where all partners have unlimited liability, or limited liability partnerships (LLPs) with both general and limited partners. The key differences between a company and partnership relate to legal structure, liability, management, ownership transfer, regulatory compliance, and taxation.

Characteristics of a Partnership Firm

• Formed by an agreement between partners
• No separate legal entity from partners
• Unlimited liability for partners
• Profit sharing as per partnership deed
• Jointly managed by partners
• Fewer compliance requirements compared to companies
• Ideal for small and medium-sized businesses

Similarities Between Company and Partnership Firm

Despite their difference between company and partnership firm, they share some common characteristics:

• Formed for carrying on a business
• Require registration with relevant authorities
• Aim to earn profits
• Governed by specific laws and regulations
• Require maintenance of books of accounts
• Can sue and be sued in their own name

Which One Should You Choose?

Choosing between a company and a partnership depends on business goals, liability, taxation, and compliance requirements. Below are hypothetical examples to help you decide.

1. Business Size & Growth Potential

• Choose a Company: If you plan to scale your business, attract investors, or raise capital, a company structure is ideal.
  
  • Example: Raj and Meera start an AI-based edtech startup. They plan to raise funds from investors and expand globally. To do this, they register as a private limited company and issue shares to investors.
• Choose a Partnership: If you prefer a small-scale business with direct decision-making, a partnership is a better choice.
  
  • Example: Aarav and Kunal start a custom furniture workshop in their city. Since they don’t need external funding and want to split profits equally, they form a partnership firm.

2. Liability Protection

• Company: Offers limited liability, meaning the owners’ personal assets are protected in case of losses.
  
  • Example: Neha runs an organic skincare brand. A customer files a lawsuit over an allergic reaction. Since Neha's business is a registered company, her personal assets remain safe, and only the company’s assets are at risk.
• Partnership: In a general partnership, partners have unlimited liability, meaning personal assets can be used to settle business debts.
  
  • Example: Vikram and Ramesh own a small event management business. They take a loan for an event but incur heavy losses. As a partnership, both partners are personally responsible for repaying the loan, even if it means selling personal assets.

Note: In a Limited Liability Partnership (LLP), personal liability is restricted.

3. Taxation Structure

• Company: Pays corporate tax, and profits distributed as dividends may be taxed separately.
  
  • Example: An IT consulting firm is structured as a private limited company. While it pays corporate tax, its owners benefit from lower tax rates on dividends compared to individual income tax.
• Partnership: Profits are taxed at the individual level, often leading to lower overall tax liability.
  
  • Example: A local bakery run by two partners is taxed based on individual earnings, avoiding corporate tax obligations and reducing overall tax liability.

4. Compliance & Legal Requirements

• Company: Requires mandatory registration, regular filings, audits, and compliance with corporate laws.
  
  • Example: A group of engineers launches a renewable energy startup. Since they have multiple stakeholders and need regulatory approvals, they register as a company, ensuring compliance with industry standards.
• Partnership: Has minimal legal requirements, making it easier and cost-effective to manage.
  
  • Example: A duo running a content writing agency operates as a partnership to avoid the hassle of extensive compliance, annual filings, and statutory audits.

5. Business Continuity & Stability

• Company: Has a separate legal identity, meaning the business continues even if owners change.
  
  • Example: A software firm registered as a company continues operations after one founder exits by transferring shares to a new investor.
• Partnership: Typically dissolves if a partner exits unless an agreement states otherwise.
  
  • Example: A law firm operating as a partnership dissolves after one partner retires, requiring a new agreement to continue operations.

In conclusion, understanding the difference between partnership and company is crucial for entrepreneurs when deciding on the most suitable business structure. While a Sole Proprietorship offers simplicity and control, a partnership firm enables collaboration and shared responsibility. On the other hand, a company, particularly a private limited company, provides limited liability and greater scalability. Consider factors such as liability, management, compliance, and growth prospects when choosing between a partnership vs company. Seek professional advice to make an informed decision aligned with your business objectives and risk appetite.

Frequently Asked Questions: