Impact of GST on Residential and Commercial Real Estate Market

Impact of GST on Residential and Commercial Real Estate Market

The implementation of the Goods and Service Tax (GST) will have huge implications on the real estate market in India. Along with instilling transparency into the sector, it will also help boost buyer sentiment across segments.

GST is conceptualised around a ‘One Nation, One Tax’ philosophy. The earlier tax regime is riddled with indirect taxes, which the GST will subsume now. GST will eliminate the cascading effect of taxes on production and distribution prices on goods and services.

The technicality of the GST is slowly being uncovered and its effect on each sector will be clear once the same is in practice in some time. Implementation of GST should ensure efficiency, subsuming the many indirect taxes. GST is a game changer, and is expected to set off revival in the real estate sector.

GST is a customer-friendly decision and its implementation will be a boon for the customers of housing and commercial sector. It should usher transparency in the real estate landscape and will boost buyer sentiment. The council has fixed the GST at 12 percent on the housing sector, with the allowance of credits for taxes paid on inputs like cement, steel, paints, and other items. The service tax of 4.5 percent that buyers paid till now while taking possession will not be levied under the GST regime. The GST should help the affordable housing segment the most. The net price in the affordable housing segment of up to Rs 30 lakh at Rs 3,500 per square feet built-up area may fall. However, the Government has not come out with an explanation on how tax incidence is calculated. Thus, some more clarity is still needed.

Though the impact of GST may vary, depending on the type of property and construction methods, when it comes to the commercial office real estate market – with the existing service tax for commercial leases at 15 percent, GST at 18 percent would be nominally impacting. However, in spite of higher rates, the sector should gain from the input tax credit that is available under GST rules.

Any real estate product has 3 cost components – land, material and labour or service cost. With the implementation of GST, the tax calculations would become much simpler, since the buyer has to pay only a single tax. GST may have a marginal impact on the sector, but it will bring significant improvement in buyer sentiment and perceptions.

Impact of GST on Daily Life

Impact of GST on Daily Life

July 1, 2017 is set to become a red-letter day in the history of India and the Indian economy. This is due to the fact that the taxation system of India, established post-independence, is set to see a radical change. Currently there is a plethora of indirect taxes which the GST aims to subsume with its implementation, thus imposing a single, comprehensive tax. This will also do away with the cascading effect of taxes on goods and services.

What is GST Bill in India

On 12 April 2017, the Central Government enacted four GST Bills:

  • Central GST (CGST)
  • Integrated GST (IGST)
  • Union Territory GST (UTGST)
  • Bill to Compensate States

These bills aim to change the current complex structure of multiple indirect taxes and replace it with a comprehensive Goods and Services Tax (GST). This will be implemented on July 1, 2017. The GST is expected to usher in a transparent and corruption free tax regime.

Key Benefits of GST (Anticipated)

  • Wider tax base, necessary for lowering the tax rates
  • Elimination of multiplicity of taxes and their cascading effects
  • Rationalisation of tax structure and simplification of compliance procedures
  • Reduction in duplication and compliance costs due to harmonisation of Centre and State tax administrations
  • Reduction of errors and increased efficiency with automation of compliance procedures
  • India will become a single market with a reduction in cost and time on movement of goods.
  • While the GST will make way for more tax revenues for government, it will lower the tax burden on industries.
  • There will be a marked reduction in paperwork and time involved in paying taxes.
  • Over time, GST is expected to add between 2 to 2.5% to the GDP.
  • Increase exports between 10 and 14%.

Impact of the GST on Services

To help understand the GST, we need to explore GST impact on common man. (Rates of select services only have been explored as an example)

  • Exempted Services: Education, healthcare, residential accommodation, hotels/ lodges with tariff below Rs. 1000 are exempt from the GST.
  • 5% GST: Goods transport, rail tickets (other than sleeper class), economy class air tickets and cab aggregators (like Uber and Ola) will come under the 5% tax slab in GST.
  • 12 – 18% GST: Work contracts, business class air travel, telecom services, financial services, restaurant services, and hotel/ Lodges with tariff between Rs. 1000 and 5000 will incur a 12 to 18% GST.
  • 28% GST: Get ready to pay GST of 28% for cinema tickets (above Rs. 100 while for tickets below Rs. 100, it will be reduced to 18%), betting, gambling and hotels/ Lodges with tariff above Rs. 5000.

How GST Will Affect Your Everyday Life

The Ministry of Finance has been keeping the masses informed about key issues pertaining to the GST. A tweet informed that daily consumer goods will be exempted from taxes under Goods and Service Tax, making them cheaper by 4 to 5%. “Daily Consumer goods being used by the common man among others to become cheaper after GST,” read a tweet.

“On roll-out of GST wef July 1, 2017, there will be zero GST on food grains, flours, cereals, pulses, atta, maida & besan among others,” read another tweet by the Ministry, informing the people about daily needs and GST.

Along with these commodities, fresh vegetables and fruits, fresh milk, common salt, puffed rice, animal feed, organic manure and fire wood will also be put under the zero% tax slab. However, the same items, if branded with registered trademark will be taxed at 5% under GST.

Raw silk, wool or jute and hand operated agricultural equipments will also be taxed at zero%, thus ‘making these items cheaper for the common man.’

Changes in The Tax Levels by The GST Council

  • Cashew nuts: Reduced from 12% to 5%
  • Ready to Eat: Pickles, chutney, sauces, instant food mixes: Reduced to 12% from 18%
  • Kajal: Slashed from 28% to 18%
  • Insulin: Reduced to 5% from 12%
  • School bags: Reduced from 28% to 18%
  • Children’s colouring and drawing books: NIL (was 12%)
  • Cutlery: Reduced from 18% to 12%
  • Select tractor components: Will now attract 18% compared to 28% under previous arrangement
  • Computer printers: Reduced from 28% to 18%
  • Ayurveda: Increased to 12% from present 8 to 9%
  • Entertainment: Theme park visits and tickets to sporting events like IPL to be charged 28%

The GST Council is meeting at regular intervals to facilitate smooth implementation of the GST. Ten working groups have been set up to help key sectors and industries like banking, telecom, IT/ITES, financial, textile, oil and gas, gems and jewelry, transport and logistics, and small and medium enterprises work through the anticipated hiccups and transition to the GST.

The Impact of GST on Tourism in India

The Impact of GST on Tourism in India

Goods and Services Tax (GST) is touted as one of the biggest reforms of Modern India. GST has got some sectors of the Indian economy delighted, while some are disappointed while the rest are a bit confused about it. GST is expected to add almost 2% to India’s GDP. Spare me the calculation but hey! that is a huge amount! Let us see the Impact of GST on Indian tourism sector.

As a consumer of Tourism and hospitality services, a single tax-structured bill should save up to 10-15 percent on the overall bill. Entertainment, luxury, and other service taxes in the hospitality industry shall attract a rate of 18% as against the existing 20-27%.

The impact of GST on restaurants:

According to the National Restaurant Association of India’s 2013 India Food Service Report, the current size of the Indian food service industry is ₹2,47,680 crore and is projected to grow to ₹4,08,040 crore by 2018 at the rate of 11%.

Many lip smacking dishes in India could be cheaper after GST!

Gains to the restaurant sector:

  • Overall cost of procurement of raw materials will go down
  • Since most items used in the restaurant industry like food grains, milk, eggs, curd, common salt, unbranded besan, sugar, tea, edible oils etc. are either exempt from GST or are in the 5% GST bracket, the restaurant industry has a lot of positive takeaways.
  • Though the entire restaurant industry will benefit from GST, cloud kitchens and Food delivery businesses will be most benefited.
Food ingredients and GST- BnBNation
Most Food ingredients are either exempted or at a low level of GST rate.

As Shitiz Dogra, co-founder of puts it, “With slightly lower procurement costs GST will make it easy for the restaurants to take credit of input goods and services consumed while providing restaurant services.”

Understandably, the cloud kitchens and Food delivery services are the happiest about GST and the high-end AC restaurants are a bit somber due to high tax rate!

The impact of GST on Accommodations in India

Impact of GST on Hotels- BnBNation
Impact of GST on Hotels

Accommodation forms a major part of a traveler’s journey. Earlier, Hotel owners were tense as room worth INR 5000 a night would have taxed at 28% but now the rooms above INR 7500 will be taxed at 28%. The tax slab shows that travelers should prefer budget rooms that cost less than INR 1000 per night.

However, I am wary if they would be the right choice for a traveler after a long flight! Especially, if situated in a shady area of a city, such a hotel room might just ruin the traveler’s experience!

The impact of GST on Bed and Breakfast accommodations

Most of the BnB owners offer Breakfast (unless the traveler is really on a tight budget) to the travelers. They handpick the source of the ingredients by ensuring that they are safe and economical. Thus, the cost of BnB rooms will be either same or lesser. Apart from that, since BnB’s do not have to pay the luxury tax or service tax up to a certain limit, they are charged water and electricity tariffs at domestic rates, unlike hotels. So when you are coming to India, you could seriously consider staying in an Indian home with an Indian family!


Though there has been chaos in the Indian economy due to GST. Don’t we crib about the rising corruption in India by referring to a low rank in World Bank’s Ease of Doing Business report. In my opinion, GST is a step in the right direction!

India has a higher rate of taxes than the neighboring South East Asian countries. However, GST will still lower the previous tax rate and may need revising them again in the near future. I think we should all welcome it and make it a part of our lives.

PS. I would recommend you consult your CA and clarify your doubts on the GST rate. Shoot your queries through to @askGST_GoI (Official Twitter handle of Government for queries on GST) through your twitter handle.

Partnership Deed

Partnership Deed – Creating and Registering a Deed

A Partnership Deed can be created using a ready-made template. There are several agreement templates that can be downloaded and edited to fit your requirements.

India is becoming increasingly popular as an entrepreneurial destination. Sole proprietorships and Partnerships are popular types of businesses in India. The regulatory requirements in these two cases are minimal. The business can be setup under these two forms quite easily. If you need more details on these forms, they are available for download right here!

Here, we discuss how a partnership can be setup in India.

Choosing a name for your Partnership firm

The first step is to choose an appropriate name for a partnership firm. The business name has to be unique; it should not in any way resemble an existing business’ name. Having similar names could not only lead to confusion, but it could also hurt the goodwill of the existing partnership firm.

The name should not include words which imply sanction or patronage of the Government of India. The State Government has to provide its consent in written if any such words have to be included as part of the name.

Creating a partnership deed

A partnership firm can be established only if there are two or more persons. A deed has to be executed; the partnership deed template is available for download right here! Feel free to browse the form and download and edit it to suit your requirements.

The partnership deed is a document which specifies the rights and obligations of the members of the partnership. In today’s times, a written partnership deed is needed for statutory and tax purposes.

The partnership deed will need the following information in the document

  1. Names of all members
  2. Addresses of all members
  3. Commencement date
  4. Details of Business
  5. Head office / Assets pertaining to partnership firm
  6. Partnership tenure
  7. Capital contributions by members
  8. Profit sharing ratio of members

These are the bare minimum details that are required, additional details may be included. Normally, these are the additional details included in a partnership deed.

  • Interest to be paid on members’ capital contribution
  • Interest to be charged on loans given to members
  • Salaries or commissions to be paid to members
  • Accounting methodology and auditory requirement
  • Powers, responsibilities and obligations of each member
  • Rules for admission of new partner
  • Rules for Retirement and Death of existing partner

Statutory requirement for registration

The partnership deed is an agreement that should be executed on a stamp paper as stipulated in the Indian Stamp Act. It should be executed in as many copies as the number of members. Each member in the partnership should possess a copy. The copy should be registered with the registrar of firms in India.

Registration of partnership is options as per the Indian law. It is entirely the discretion of the partnership members whether they want to register the partnership or not. Partnership firms in India are governed under the Partnership Act, 1932.

Registration of the partnership firm can be done prior to the commencement of business or subsequently while the business is operational. The following documents are to be produced with the registrar of firms alongside the application –

  • Form No. 1 is the Application of registration of partnership
  • Specimen of Affidavit
  • Original copy / copies of Partnership deed
  • Proof of ownership, rental / lease agreement of partnership firm’s office

The application and affidavit has to be duly signed by all the partnership members. The registrar of the firm will issue a certificate of registration and will make an entry into the partnership firms register for registration of the business. This will be done only if the documents submitted are satisfactory.

For more details on the forms needed, look here and download the forms you need here.


Partnership Firm

Suitability Analysis Of Partnership Firm (UPDATED FEB 2017)

Partnership firms and sole proprietorship forms of business entities are popular in India. Partners who have entered an agreement to carry out a business are collectively called Partnership Firm. The name under which the business operations are carried out is termed as the “firm name”.

The partnership firm comes into existence by the execution of a partnership deed. A partnership deed can be oral or written. It can either be registered with registrar of firms or not as per the discretion of majority of partners in the partnership firm. For tax purposes though, a written partnership agreement is mandatory. Also, registering the partnership firm offers benefits which will not be available otherwise. Templates of partnership deeds are available for download here.

Key elements of Partnership Firm’s existence

Below is a list of elements which are the very essence of partnership firm.

Partnership deed

A contract is the very foundation for a partnership firm. Unlike a HUF which arises out of Status and relationship, the partnership firm arises out of contract. Concept of inheritance of partnership does not exist. If any member of partnership passes away, the legal heir can only make a claim on the assets of the member. The legal heir cannot lay claims for partnership in the form, unless he enters a separate contract with the other partners. For more on the partnership deed, download this form here.

Minimum and Maximum Partners

The Indian Parternship Act 1932 which governs partnership firms mentions that 2 members are required to form a partnership. This is the minimum number; it does not mention any maximum number. However, the companies Act clearly mentions that any partnership firm should not exceed 20 partners. It specifies that any firm conducting banking business, having more than 10 partners and any other business (partnership firm) with more than 20 partners is considered illegal.

 Conducting business and intent to make profits

The partnership firm has to be formed with a view to carry out some business. It can be trade, service, manufacturing or anything else. It has to have a profit making motive. A charitable organisation cannot be registered under partnership firm. The intent to make money out of the business operation is essential.

Profit Sharing

The partnership deed has to specify the ratio in which the profits will be shared. It can be in any ratio, if there is no ratio specified than it is divided equally. There need not be any restrictions on how the losses will be shared. It can be borne by a single partner as well.

The partnership deed (available for download here) should expressly specify the ratio in which the profits / losses will be shared. Else, the Indian Partnership Act 1932 specifies that it shall be distributed evenly. Unless, the partnership firm is registered as a Limited liability partnership (LLP), the liability of the partners in the firm will be unlimited.

Benefits of Partnership Firm

  • Easy Setup: The process to register a partnership firm is fairly simple and hassle free.
  • Operational Flexibility: Due to the limited number of people, the operations of business can be altered as per requirement. In consultation with the partners, the changes can be implemented, there need not be any written documentation of changes so included.
  • Better control: Since the members are lesser, they hold better control over the operations and the quality. They also have better view of the fund’s movement. Operational efficiency and resource management is better than private limited and public limited companies. In fact, the management is better compared to sole proprietorship due to shared responsibilities.
  • Decision Making: The decision making is more effective, given that there are more minds put together. Each may have the same intent whilst forming the business partnership. However, on operational issues, they may bring in various views and expertise.

A partnership firm is best suited for services businesses that need operational flexibility and efficient resource management. For further information on the paperwork needed to sign a partnership, download the relevant forms here.



LIC Policy

LIC Policy – Everything You Need to Know (UPDATED SEP 2017)

Updated on 7th September 2017

Purchasing an LIC policy is not as easy as other people make it seem. Whether you have the help of a reliable insurance agent or are purchasing on your own terms, getting a Life Insurance Corporation (LIC) policy requires extensive research and preparation.

Buying life insurance is basically the same as jumping into the water with your life jacket on. You must know what you are getting into before you give your stamp of approval.

Here is a list of things you need to know prior to purchasing an LIC policy:

It is important to identify your needs

As an insurance buyer, you must have a clear set of standards. What type of insurance are you looking for? Do you want the regular life insurance plan or one with added features (i.e. accident and health, endowment or investment)?

For how long do you intend to pay? Are you buying for yourself or for your whole family? By identifying these insurance needs, you get to narrow down your choices and can better compare insurance packages from different providers.

If you have difficulty pointing out your needs but are still keen to buy an LIC plan, then you should seriously consider talking to an insurance agent. Look up agents near your residence. If you search online, you can read testimonies and reviews about various insurance agents. From there, you can select the agent who you think can provide you with the right answers.

If not, just call LIC, request to be referred to an agent and, when an agent is available, relay all your insurance concerns to that agent so that he or she can assess your needs and recommend suitable policies.

The ideal way is to choose a coverage that matches your financial capacity

Many life insurance buyers who fail to pay on time have bought policies with high premiums. Some buyers end up terminating their plan because they could no longer afford to pay. Others would argue that insurance prices have surged so unreasonably over the years.

Hence, the inability to pay. However, more often than not, it is not because insurance prices have increased that some people could not pay on time or put a stopper on their policies. One of the main reasons is that they chose a coverage they could barely afford.

The trick is to gather as much information as possible, compare different types of policies, evaluate whether they fit your budget and then decide accordingly. Never purchase a life insurance policy without knowing what top insurance companies in India are offering. You must have a clear idea of how much you would like to be covered so that you can pay for your policy until it matures.

Comparison lets you find the right LIC Policy for your needs

Besides sifting through insurance policies, comparing prices and reading through the terms and conditions, buyers also need to pay attention to two different types of life insurance plans. One is called term insurance, which is generally characterized by low premiums in the first few years.

Though affordable, this type of life insurance is plain and you cannot make additional money from it for future use. On one hand, cash value life insurance has three categories: universal, whole and variable. Each of these categories have different saving and money-making mechanisms. What they do have in common is that you have bigger return on investments after the maturation of the life insurance plan.

The advantage of the latter plan is that the additional money you generate can be used in the future. Decide whether getting a cash value life insurance is better than getting a simple low-premium term insurance. Neither one is greater than the other but choose the type of plan that suits your insurance needs.

Reading your life insurance policy thoroughly can spare you from future worries

You may have consulted with the best LIC agent in town but agents can only explain and make you understand your policy so much. To know every specific detail from yearly premium increases to payment interests to the scope and limitation of your benefits, you must take time to read and understand your policy.

In fact, it is ideal to read it before finalizing your purchase decision. The policy will set you straight about everything and let you know what you are getting into. If you do not agree or find it hard to compromise with the policy, then you have every right to bail out – that is if you read it before making your initial payment.

Top insurance companies in India set different terms and conditions. That is why during the comparison stage, it would be ideal to go through the policies of all insurance plans in your short list. This can be a time-consuming process, but if you want the best life insurance plan out there, then you have to leave no stone unturned. Sooner or later, you will be thankful for the effort you put in.

Keeping your existing policy is better than discarding it

If you are not happy with your existing policy, there is no need to cancel it. You can certainly buy a new life insurance plan with a better policy but there is more to be gained by keeping your current policy than totally replacing it.

Try to see if your existing policy can be changed or adjusted to the coverage or benefits you want. Many insurance companies provide this option. It would be such a waste to cancel your existing policy. You can also go for a plan with a top-up feature so that your existing plan can still be utilized.

Information dispels doubt and fosters understanding

Many insurance buyers regret their past policy choices and charge their mistakes to experience. However, first-time life insurance buyers need not go through such an experience just to get the perfect policy for their needs. If you are new to life insurance, the only antidote to your anxiousness and doubts is being informed.

In addition to reading your policy from cover to cover, poring through online articles and reviews, and discussing your concerns with an agent, you also need to expand your information sources by keeping up-to-date with insurance news, market trends, and the economy, among others.

With more pieces of information at your disposal, you are less likely to choose the wrong life insurance program

A well-informed and reliable insurance agent is cost-efficient

If there are first-time buyers and buyers with existing insurance plans, there are also buyers who have no time to read their policies but have enough budget to buy a good life insurance program. What these buyers need is an agent who can explain the nitty-gritty of a policy within a short time frame. This agent must also be objective so that buyers with a busy schedule can see the pros and cons of each insurance program and choose well, in accordance with their preference.

Buyers must proceed carefully when touching base with an agent. Some agents tend to pressure clients into buying expensive policies that do not even suit their needs. If you are unsure, just ask the insurance provider directly and they will be the one to refer you to a reliable agent. Also, take note that a number of trustworthy and star-rated agents work for top insurance companies in India. Reading about their background and reviews or testimonials about their services would be helpful.

The type of LIC policy or insurance plan you get is only as good as your effort. If you want to obtain the coverage or benefits of your preference, then you must go the extra mile.

By setting your life insurance priorities, reading your policy, being informed and communicating with the right agent, you can certainly get an insurance plan that you know you deserve.

Private Limited Company

Understanding & Registering a Private Limited Company (UPDATED FEB 2017)

Most start-ups these days prefer to form a private limited company. This makes it easier for them to raise capital through angel funding and venture capitalists. They also offer employee stock options with a view to retain talent.

Banks and other financial institutions also find it comfortable to lend to private companies than to partnership firms and sole proprietorships. Without funding and talented employees, any company (especially in the services space) cannot expand.

Understanding Private limited company

This is a company which offers limited liability to its members. It also places certain restrictions on ownership. These restrictions are mentioned in the Indian companies Act, it is essential to prevent hostile takeover of business.

The restrictions as prescribed under the Companies Act are mentioned below –

  • Existing shareholders are not allowed to sell / transfer their shares to others without first offering the same to the rest of the shareholders for purchase
  • Shareholders are not allowed to offer their shares to public over the stock exchange without adequately notifying the authorities / exchange
  • Number of shareholders cannot exceed 50 members

Members of Private limited company

A private limited company should have a minimum of 2 members as directors and shareholders. It can have a maximum of 15 directors and 50 shareholders. The restriction placed on private limited companies is less compared to public limited companies.

In case private limited companies, there is no requirement to disclose the books of accounts to the public. This provides them ample flexibility to focus on long term growth. The number of shareholders is also minimal; hence, it is not as challenging to appease all of them.

Advantages of Private Limited Company

  • Members’ liability is limited: The members’ liability is to the extent of capital contributed during the formation of the private limited company. The personal property will not be included to settle debts in case of bankruptcy or liquidation of assets of the company.
  • Raising equity becomes easy: Most venture capitalist / strategic investors prefer to fund private limited companies. They have a clear demarcation of directors and shareholders. The liability of the members’ is also limited. Private companies have the ability to accommodate equity funding without much structural alterations.
  • Debt access: Banks and financial institutions more comfortable in lending to private limited companies. They also have the option of raising funds by issuing warrants, debentures and other debt instruments.

Documents needed for registration of private limited company

The directors and shareholders have to submit the below mentioned copies –

  • Copy of PAN card
  • Copy of passport (in case of foreign nationals / NRIs)
  • ID and Address Proof (in addition to PAN card)
  • Photo – passport size
  • Specimen Signature

For registration of office, below mentioned documents become necessary –

  • Copy of bank statement/ electricity / gas / telephone bill (latest)
  • Property deed (own property ) or Rental /Lease agreement copy (Notarised)
  • NoC from property owner

The registration of company can be done online, go here for further information. All the above documents have to be filed online. Physical presence is not required at all. If all the documents submitted are in order and depending on the workload of the registrar of companies. The company should be registered in less than 15 days.

The registration process is governed by Ministry of Corporate Affairs. The online registration process is an initiative which was launched as part of “Start-up India” campaign. There are few registration norms which are to be followed as part of the online registration – Digital Signature Certificate, Director Identity Number, E-form filing are mandatory while registering the private limited company. For more details on the process go here. And if you are missing any forms, you can download them here.

Firm Registration

Firm Registration – Registering a Partnership Firm in India (UPDATED June 2017)

Last updated: June 2, 2017

Here are complete instructions on firm registration so you can register your Partnership Firm with the Government.

A Background on Partnership Firms

So, how can you be sure that your business is considered a partnership firm, then?

For starters, partnerships are types of firms that do not result to unlimited liability to its members, compared to traditional businesses. What sets partnership firms in India apart is the fact that partnership firms do not need to have at least one mandatory member who would shoulder unlimited responsibility. Therefore, the liability would then depend on the capital that the partners have invested for the current business.

Another thing you can keep in mind is that partnership firm members would be able to have high level of protection, and only limited liability when it comes to financial risks regarding the business.

Before you set out for firm registration of your partnership firm, you do have to be mindful of the following:

  • You or your partner/s cannot file any suit in court against other partners or the firm itself, as this is written in India’s Partnership Act.
  • You or any of your partners cannot claim mutual adjustment of debts, otherwise known as set-offs, which are owned by disputant parties, or any other proceedings.
  • You cannot enforce any contract from the court, and it couldn’t be allowed to arise in any way.

Advertise Here

Choosing a Name for Your Partnership Firm

One important thing that you should do first when it comes to proper firm registration of a partnership firm is that you have to choose a name for your business first. For this, you have to keep two important things in mind, and these are:

  • You have to make sure that the name isn’t too similar to that of another existing firm. This way, confusion would not ensue, and in case the other firm with the same name as yours gets into squabbles, or gets negative reputation in business, your business would not be compromised. There are also several mobile apps that can help you check whether the name you want is already registered or not. These apps are available on the iTunes and Google Play stores and they support all phones including the upcoming mobile phones.
  • You have to make sure that you would not use the following names for your business: Emperor, Crown, Empire, and Princess. Using these terms would not make firm registration easy because these words imply patronage, approval, or sanction of the Government, unless you have to use them as allowed by the government itself.

Check for Name Availability. You might also want to check the availability of your chosen name/s first, just to be sure. This will also save you a lot of time and effort so you won’t have to waste your firm registration time choosing names that have already been taken, or are not allowed. To do this, just follow the guidelines below:

  • Go to the MCA website, and then enter your proposed name in the space labeled Company Name.
  • You’ll then see a dropdown box that shows names of the same kind, if any, so you’d know if your chosen name has already been used before, or if it might cause confusion once you push through in using it.
  • If you see the words “no records found” flashing on your screen, it means that there are no companies with a similar name, and you can push through with using the name that you have already chosen.
  • You can also do the same to check for trademarks or trademarked names. Just enter your proposed name in the wordmark, followed by relevant class, and then you’ll see if any records have been found or not.

The Process of Registration

Now that you’re able to prepare for it, it’s time to understand how the process of firm registration should go for your business. For this, you need to make a partnership deed, mostly because oral arguments do not have any value whatsoever when it comes to the state of your business. A partnership deed should include the following:

  • Name and address of the firm—which also includes names and addresses of all partners involved;
  • Enter your full name, which should be more than a single alphabet in both the first and last name fields. You’d have to fill up your father’s name, as well.
  • Attach a photograph with a full view of your face, facing front.
  • If you’re a foreign national, the nationality you should input is the one that’s written on your passport.
  • Enter educational attainment and current occupation, as well.
  • Take note that for foreign nationals, adding passport number is mandatory to make firm registration
  • Enter residence details—and make sure it matches your current area of residence, and not where you have lived years ago, or in the future.
  • The date when the business was commenced, or would be commenced;
  • The Nature of the business that you’d be carrying on. This means that you have to say what the business would be about, why it is important to put the business up, why it matters in its niche, etc;
  • The Capital Contribution of each of the partners;
  • The Duration of the Partnership. This could denote whether it’s for a given period of time only, or if it would be for a permanent position or amount of time, and;
  • The kind of profit-sharing that would happen between the partners.
  • Provide identification details, affidavits, if needed, and digital signature. Once you have provided all the required details, register using the eForm, also on the said website.

To make firm registration happen, you have to make sure that the application is signed and verified by all of the partners, and that all the prescribed fees are enclosed within the partnership deed, or application documents.

Application Form 1

In the envelope, you will also have to enclose Form 1 for firm registration, which should contain the following:

  • The Class No. of Your Business—you can figure this out at the office of the Ministry—there are lists you can follow there;
  • The full name and nationalities of the partners;
  • Design/blueprint or sketches of the business;
  • The name of the article or design which the business applies to the trade description of each set;
  • Name of country, official date when the business was set or has been thought of, official number of service, and make sure that you have it addressed to the Controller of Designs in Calcutta.

Specimen of Affidavit

The next step in firm registration in India is to make sure that you fill up your specimen of affidavit. Basically, this is a sworn statement that would verify firm registration, and make sure you’re following due process. The affidavit should contain the following:

  • The identity of the person making the declaration (you and your partners), or the declarant;
  • The individual’s current address—do this for each one signing the document, or the location;
  • The signature of the one who’s signing the affidavit, also known as signature;
  • A list or statement of facts that you’re trying to declare under oath, and;
  • Notary Acknowledgment—which means that you need to have the affidavit notarized to verify its authenticity.

Completing the Partnership Deed

Aside from what was mentioned, you have to complete your partnership deed by adding the following:

  • Commissions, salaries, and other forms of payables to all parties;
  • Partner’s Capital Interest and Interest Rates, all of which have to be charged on drawings;
  • Account Preparation Methods;
  • Rules that the company would have to follow in case of accidents, bankruptcies, or deaths, and;
  • Division of responsibilities and tasks, together with obligations and powers for all of the partners

You can customize and personalize the partnership deed, depending on the kind of business you have, and what you and your partners deem to be good for it, and should be placed on a stamp paper for it to be considered helpful for firm registration. This is in accordance to the Indian Stamp Act, which contains the following parameters:

  • Several instruments should be used for single transactions of mortgages, sales, or settlements;
  • Instruments should be chargeable with duty;
  • No payment on principal instruments of the Payment of Punjab Duty should not be made prematurely;
  • Debentures and Bonds relating to 1879’s Act 11 should be declared;
  • There should be sea insurance policies;
  • The use of adhesive stamps should be well thought of;
  • You have to know how duties should be paid;
  • There should only be one instrument on the same stamp;
  • The deed should denote the proper duties of the partners involved;
  • Facts affecting the said duties should be duly noted;
  • Payable duties should be made known, and;
  • There should be obligation to give receipts up on certain cases.


Acquire DSC. Next, you’d have to get DSC, or Digital Signature Certificate so that you would get the right level of security. If you have managed to read the earlier instructions, you’d know that you can get this while applying for DIN eForm 1. However, if you choose to make this the first step of your personal firm registration, you can check out a couple of websites that can allow you to do this. Not only will you be able to download the certificate you need, you will also be able to track your application, review certificates, and revoke them, if needed.

Now that you know how firm registration happens, it wouldn’t be a surprise if another question plagues you, and it is about how much the whole registration process will cost.

How much would it cost?

What you have to know is that there are different fees that you’d have to be prepared to pay during firm registration. These are as follows:

  • Firm Partnership Registration. This could be around Rs 500 to Rs 5000, depending on the amount of contribution, which in itself could range from Rs 1 Lakh to Rs 10 Lakh. Take note that these fees will have to be paid until you have submitted or have gone through Form 3.
  • Document Recording/Registration. You would also have to pay for the recording or registration of documents that you have. These include forms, Statement of Accounts and Solvency, notices, or any other kind of annual returns that could make way for the registration, privatization, or conversion of any companies. This could go from RS 50 to Rs 500, depending on the amount of contribution, which could range from Rs 1 Lakh to Rs 10 Lakh.
  • Conversion of firms or unlisted public companies. Applications of names u/s 16 would cost Rs 200; names u/s 18 would cost Rs 10,000; names under rule 18 would cost Rs 10000; renewal of names would cost Rs 5000, and application for DPN rule would cost Rs 100.
  • Inspection of Documents. You might also have to pay to have your documents inspected properly. For documents under section 36 of the LLP, you’d have to pay Rs 50; for extraction or copy of documents under section 36, you’d have to pay Rs 5 per fractional page, as filled up by the registrar or Ministry.
  • Statement of Accounts and Solvency. And of course, you would also have to pay for the notices or solvency of documents courtesy of the foreign limited liability partnership. Documents under rule 34 cost Rs 5000, and any other documents or forms of Accounts and Solvency would cost Rs 1000.

These costs are laid out not to scare you, but to make sure that you would be prepared for them, so that the incorporation of your firm would not be derailed simply by small financial matters—and so you’d know what to expect, as well, and that way, firm registration would not be a hassle.

Keep the Following in Mind

Finally, you have to keep the following in mind so that you won’t be confused when it comes to firm registration:

  • It is a Separate Legal Entity. Partnership Firms are considered as juristic persons, and legal entities, based on the Partnership Act of India. This means that it is its own property—no matter how small it is—which means it is seen as a form of organization, and at the same time, it can also incur its own debts, without affecting others in the process. This also means that Firm Partners would have no liability to creditors—which is definitely a winning situation for the firm.
  • One is not responsible for the other. When a business goes down, what comes to mind is that everyone gets to be affected, especially the business owners or managers. That’s not the same for Partnership Firms. When your partner experiences certain losses, it does not necessarily mean that you will, too. If your partner gets involved in fraud, it also does not necessarily mean that you’ll have to be indicted, as well. It also means that your personal properties would not be taken as collaterals to pay off your debts—which definitely lessens the hassle of the process for you.
  • An uninterrupted existence. Partnership Firms make way for perpetual succession. This basically means that the firm would have uninterrupted existence, and would still be continued until the event that it gets dissolved. This also has a lot to do with the fact that it is a separate entity, which means it would not get affected by departures of any kind, or worse, death. It would go on, no matter what the changes in partnership might be.
  • Easy Transferability. Suppose you or your partner would want to give your rights as owner of the firm to somebody else, you would be glad to know that when it comes to Partnership Firms, transferability is fairly easy. What you only have to do is introduce and induct them as your Designated Partners, which would then allow Managing Partners to be changed, and thus, the ownership of the firm follows.
  • Ownership of Property. You and your partner/s would be considered as both the owners and managers of the company, and no one else could take that position and power away from you. No other person could also claim ownership of the property, unless it has been legally transferred, as well.

Keeping Things Right and Legal

As you can see, partnership firms are pretty much the kind of businesses you’d like to get yourself into. They give you enough privacy, security, and freedom, especially if you’re new in the world of business. It gives you enough power to run the business without negatively affecting your personal life. It also gives you the chance to have working power transferred to those you see fit, without having to go through unnecessary rubbles.

Of course, there are downsides, too, such as the fact that partnership firms cannot, in any way, raise public funds, and that the wind up process may be a bit complicated. The amount of fees that you’d have to pay may even be considered staggering by some.

But when it comes to allowing you to run your business freely, and make sure that you have something you will be proud of, partnership firms are the real deal. This is why it makes sense to know what needs to be done to make things legal.

Now that you know how firm registration is done, you now have the chance to achieve the kind of business that you can make an honest living from—and now, you can also be sure that everything will be right and legal, too.

Company Registration in Delhi

Company Registration in Delhi (UPDATED FEB 2017)

When you put up a new business, it’s best to make sure that you keep everything legal, and one of the first things you should do is make sure that you follow the rules of company registration in Delhi.

You see, registration is important so that when you run your business, you can be sure that you won’t have to deal with lawsuits. According to the Companies Act of 1956, a company is considered a legal entity, which should be registered with the state’s company registrar, so it can have “limited”, “incorporated”, or “LLC” attached at the end of its name.

So, how exactly does company registration in Delhi happen, then? Read on, and find out.

Private and Public Companies

First of all, you have to understand that there are two main types of companies, and these are 1) Private, and 2) Public. You have to know which of these categories your company falls under before you go ahead with the process of company registration in Delhi.

Here are their differences:

  1. Private Companies. A private company has a minimum of 2 board members, a maximum of 50 members, and at least 2 directors. A private company can also start their operations exactly after being incorporated, but should at no time be able to sell their shares or invite people to obtain company shares.
  2. Public Companies. Meanwhile, a public company should have around 5 board members, 3 directors, and any number of members. It is also important that public companies do not start operations until they get a certificate of business commencement, but they are allowed to invite people about company shares, in the event that they use a prospectus—a printed document that talks about what kind of company it is, who they are, and what they are trying to do, among others.


 Documents You Should Have on Hand

Before you proceed to go for company registration in Delhi, you first have to make sure that you have the following documents on hand:

  1. This stands for Director Identification Number, which has been a compulsory requirement for every company director ever since 2006.
  2. Form-1. This is also sometimes called DIN-1 Form.
  3. DSC, or Digital Signature Certificate.
  4. Form-18. This is used to determine the address or location of the company that has been proposed.
  5. ROC Formal Letter. You will need to get an original copy of this document as it means that the company name you are trying to go for is still available for use.
  6. Form-32. Finally, this is used to know the particulars of managers, directors, and secretaries.

Now, the formal process of company registration in Delhi should begin.

First Step: DIN Acquisition

The number 1 process in company registration in Delhi is the acquisition of the DIN. Even if you have already been a director of a company before, if you are part of putting up a new one, it is still required that you get a DIN.

You can get the DIN at the Ministry’s Official Site. Just look for the tab that says DIN-1 Form, and then do the following:

  1. Go to Delhi’s Ministry of Corporate Affairs website, and have yourself registered. Choose your log-in ID, password and other particulars. Then, check the tab with the DIN-1 Form, fill it up with the required information, and then have it uploaded to the website by clicking the eForm upload You will see that there are some fees that you have to pay, so just go ahead and prepare for them. To properly register, you have to make sure that:
  • Your computer has an OS of Windows 2000 or later versions;
  • You have internet access, and that you are using Internet Explorer 9, Chrome 33 and above, or Firefox 24 and above;
  • You have Java Runtime Environment running at JDK1.6U30, and above;
  • You should have access to a scanner—because you will have to scan the documents;
  • You have Adobe Acrobat 11 installed;
  • You should have MCA21 Portal pop-ups ready to show on your computer, and;
  • You should have access to a printer so you can have the documents printed out.
  1. Now, you should have your company integrated with your DIN—so your own brand will be created. What you can do here is fill up the DIN-2 Form.
  2. Next, make sure that your company name has not been used by others before by getting a certification from the Registrar of Corporates (ROC). For this, fill up the DIN-3 Form.
  3. If in case you need to change details in your DIN-1 Form, make sure to have it properly edited by answering and submitting the DIN-4 Form, and have it uploaded through the website.

Second Step: Digital Signature Certificate Acquisition

The next step in company registration in Delhi is to get DSC, or Digital Signature Certificate. This has to be authentic, and documented well—and you can find it on your DIN-1 Form. It is known as one of the safest ways of securing signatures, as opposed to the old-school type of just writing everything out on paper.

Take note that your digital signatures should only be acquired by agencies that have been approved by the Controller of Certifications. Do not use it for anything else, lest you want to be labeled with illegal handling of signatures.

However, if you already have an existing digital signature, you can use it for your new business so you can hasten the process of company registration in Delhi. Just make sure that you have it renewed—this usually happens in a matter of 1 to 2 years.

To acquire your digital signature, just check the following agencies:

  1. This stands for Institute of Development and Research in Banking Technology, an operational service dedicated to improving transactions in financial and information technology institutions.
  2. This stands for Tata Consultancy Services, and has been established to help those who need business solutions delivered so certainty in business can be experienced.
  3. SAFESCRYPT. Known as India’s very first licensed certifying authority, you can be sure that the digital signature you will be getting here will really be authentic—and they also have a number of key systems to keep you safe.
  4. This is Mumbai’s Customer Self-Care Program that offers internet access, telephone, and mobile services to customers, and is one of India’s best telecom providers.
  5. nCode Solutions. This is another one of India’s certifying authorities, and is known as a leader of Network and Internet services.
  6. This stands for National Informatics Centre, which is primarily the Indian Government’s prime web services organization.

You can register in other companies, too, but the ones given above are the most trusted ones, so make sure that you opt for them, instead of anything else. Minimal fees have to be paid, as well, so do prepare for that.

Third Step: MCA Account

Then, the next step in company registration in Delhi is to create a new account on the MCA Website, different from the DIN-1 account. This way, you can easily navigate the site, and control your user preferences, and for this, you won’t have to pay for anything.

Once you have created an account, you can expect to experience the following: associate, acquire, and update DSC; inquire DIN status, and verify the said status; view LLP/company master of data; view signatory details and index of charges; view director’s master data; view which LLPs have been registered in the last 30 days; create advanced searches; enter or update details, and file and update eForms, as well as track investor status; create service-related complaints; inquire fees, and get certified copies of important documents, amongst others.

Fourth Step: Have the Company Registered

Finally, you can have your business go through company registration in Delhi—after following the first three steps—by doing the following:

  1. Fill Form-1. This will serve as your declaration that you would like to have the company incorporated.
  2. Fill Form-1A. This would be your main application form to register for the availability, or for the change of a certain company name. You will basically be asked for 4 potential company names so that it will be easy to pick an alternative, in case one of your given names has already been used before. Submit Forms 1 and 1A.
  3. Now, fill Form-18. Fill it up with your authentic office address. You can also use the said form to state that you have changed the place of your office—even one that you have registered previously.
  4. Fill Form-32. This is the notice of appointment for directors, managers, and secretaries if you are trying to have a new company registered. For re-registration purposes, however, this is used for a notice for the change of the said positions.

Fill all these forms up, and submit them to the MCA. Check your email for a confirmation.

In a matter of 10 days, you will get notified by the ROC as to whether your registration has been approved, or if there are any objections. For example, if none of the names you have registered have been approved, you will get a list of new names to choose from, and then you will soon be getting a formal letter to tell you if the new name has been confirmed.

What to do after registration

Company registration in Delhi doesn’t just end after the fourth step. To make sure that everything runs smoothly, you will have to follow up with the following:

  1. TAN Card. Also known as Form 49B, a TAN Card stands for your Tax Application Number—definitely important when you are trying to run a business. You need this because when you have a company, chances are, you will be dealing with eCommerce transactions—and this helps make everything run smoothly—and legally, too.
  2. Shop and Establishment Act Documents. Get some when you have been required to do so. This is mostly used for Delhi Trade Union, and has been around since 1954. For this, you will have to make way for the following to be known:
  • Certification that you are a legal adult (18 years of age and above);
  • The day of the week when the shop shall be closed, if any;
  • The names of your apprentices—or people who are helping you out in the business, or are employed in your company, whether they are paid wages or salary, and who can be trained in your craft;
  • The thought that your company is a commercial establishment—or is working in connection with commercial facilities, and can provide clients with their needs;
  • Opening hours of the business;
  • The time when your shop closes, or “closing time”;
  • Time of day when your shop operates;
  • Name of the employer, or the one who owns the establishment, whether it is a restaurant, shop, or any other form of establishment;
  • The kind of establishment the company is;
  • Names of family members of the employer—nuclear family only;
  • Whether or not your company is a “factory”, as depicted by the Factories Act of 1948;
  • Holidays, or whether the company will operate during holidays, and which specific holidays these are;
  • The name of the Chief Commissioner or Government of Delhi;
  • Residential hotels, or if you have places in the institution where people can sleep, or dwell temporarily;
  • Youth, or if you have employed anyone who is not yet of legal age (18 years and below);
  • Summer months, or what the company plans during the months of April to September, and;
  • Year, or the current Calendar Year.
  1. PAN Card. PAN means Permanent Account Number. You can get this from India’s Income Tax Department. With this, you will easily get access to the Tax Calculator, can apply online for your TAN, view your Tax Credit form, and pay taxes online, as well—so there will be less hassle for you.
  2. Registration of Import Index Code. This is mostly for foreign traders. This way, even if you are a foreigner living in Delhi, you can still be sure that your company will be legal. Any bonafide person wanting to establish business in India should have an Import Index Code that would serve as a primary recognition by the Government of India. With this, you can get the proper payments and benefits. You can apply for this online by downloading the form on the Zonal JDGPT Office—process usually takes 2 days, and you should prepare for the following:
  • Certified self-copy of PAN that has been issued by 2 income tax authorities;
  • Demand drafts or bank receipts that detail your payment for the application fee;
  • 2 copies of passport-size photographs. Please have them attested by your own banker;
  • Banker’s certificate with the Appendix 18A Format, and;
  • Self-addressed stamped envelope where the documents should be stored in.
  1. RBI Approval for foreign companies, if required. This should come from the RBI, or Reserve Bank of India. Basically, this allows you to convert or not convert your earnings into equity, and it also gives you complete instrument pricing. This also covers the following:
  • NRC/FNCR Debit account under a certain category of the person involved;
  • Normal banking channel remittance;
  • Non-interest bearing debit that should be paid in Indian Rupees, with approval from the Office of the Director;
  • Conversion of import payables, share swaps for consideration of issues, and conversion of lump sum or royalties, together with other technical fees.

You need to have these issued at least 180 days after filing for RBI approval. Take note that the following companies are not allowed: lottery, atomic energy, business of Chit Fund, betting and gambling, and NIDHI.

  1. Registration for Software Technologies Parks of India, if required. Also known as STPI, registering for this is free. This covers:
  • Specialized trainings and seminars;
  • Management or establishment of infrastructural resources;
  • The promotion of secondary or tertiary locations related to the company, and schemes that have been announced by the government;
  • To work closely with the state government;
  • To try promotional activities that include market analysis, assessments, market segmentation, and the organization of workshops, conferences, seminars, and exhibitions;
  • The provision of project management and consultancy divisions, and;
  • The promotion of entrepreneurship amongst members of a community.
  1. Valid Digital Certificates for both Indian and Foreign Directors. In case 2 or more nationalities serve as directors of the company, all of them need to have valid digital certificates from authorized agencies.

Once you have passed all that’s required of you, company registration in Delhi becomes complete.

Specific but Legal Process

As you may have noticed, company registration in Delhi is not an easy process. However, it just goes to show that when the proper things are done, a business becomes legal—and there’s no risk that it would be slapped with lawsuits and the like, unless necessary.

If you’re planning to put up a business in Delhi, make sure that you follow the rules of company registration in Delhi, and you’ll be on the right track. Good Luck!

LLP Registration

Everything You Need to Know About LLP Registration and LLPs (UPDATED FEB 2017)

Limited liability partnerships, or LLPs, are based on a fairly new but quite an innovative concept. While they haven’t been around for long and came into existence to close some major loopholes in the laws throughout the world that left many who work as partners in a business exposed to major financial risks.

However, an LLP comes with a wide range of benefits over the other traditional types of businesses. Apparently, it’s also much more convenient to manage, and these are probably some major reasons for the exponentially growing popularity of LLPs throughout the world, with India being no exception.

With that being said, let us try to learn pretty much everything there is about LLPs, how they function in India, as well as how to go about registering one in the country.

An Overview

An LLP or a limited liability partnership is basically a partnership which doesn’t burden all its members with “unlimited” liability, as is the case with the traditional partnerships and corporations. In fact, depending on the jurisdiction, none of the members may be subjected to unlimited liability, meaning that all the members of the LLP would enjoy a limited liability and hence a significantly higher level of protection against the financial risks associated with traditional partnerships.

However, that doesn’t mean that an LLP functions very differently from a traditional partnership firm, which may mean that it would be more challenging to run the former. In fact, there are a surprisingly large number of elements that are common between an LLP and a partnership firm or corporation. One major difference (and benefit) of an LLP is that the partners aren’t responsible for the misconduct, negligence, wrongdoings or irresponsible business decisions taken on the part of another partner.

This is actually a huge relief for those looking to start a partnership business, as according to the Partnership Act 1890, which governs the traditional partnership businesses, ALL members of the partnership business would be jointly liable for another member’s mistakes.

Hence, this makes an LLP the clear winner between the two, with the former even allowing some partners to have a form of limited liability that’s very similar to the ones shareholders have in a company. However, unlike shareholders, the partners obviously have controlling rights in the business.

This makes LLPs more attractive to investors who would usually not bother considering an investment in a traditional partnership (thanks to the unlimited liability). This is because while an investment in an LLP may offer all the benefits that come with investing in any particular type of business, it would also come with the added advantage of being able to play a active role in the business’ management.

However, it’s also worth noting that in some countries, it’s mandatory for at least one partner to have “unlimited” liability in the partnership.

Finally, another important difference between LLPs and traditional partnerships are the different tax laws.

Emergence of LLPs

The U.S. became the country to introduce the concept of LLPs to the world in the early 1990s. Back then, the U.S., and particularly Texas, was hit by a major slowdown with real estate and energy prices tumbling to surprisingly low levels.

This resulted in the failure of many banks, savings and loans. However, as it wasn’t possible to recover most of the losses, the banks turned to the lawyers and accounts who advised them in the early 1980s to recover their losses. This is because the laws in existence back then allowed the recovery of such losses from those partners in the law and accounting firms, even if this meant that they would personally go bankrupt in paying off the losses which apparently weren’t caused due to their direct involvement.

Hence, it was only fair to shield such partners from such potential huge financial risks, and this led to laws being passed to introduce a new concept that would protect such members of partnership businesses, introducing the concept of LLPs to the world.

Many other countries followed suit, as they too realized the importance of LLPs and the major drawbacks associated with traditional partnerships, including India, Canada, Japan, Germany, China, Poland, Romania, Singapore, Greece and Kazakhstan.

LLPs in India

Well, now that you know what an LLP basically is and how it came into existence, let’s get into the things you need to know about starting one in India, including LLP registration.

An Introduction

LLPs came into existence in India when the official Gazette of India published the Limited Liability Partnership Act 2008 on January 9, 2009. It came into effect from 31 March, 2009. However, it covered just a few sections.

It was updated a few months later, by adding sections that mentioned how traditional partnerships and other companies can convert into an LLP.

The first LLP was registered in the first week of April, 2009, followed by many more over a short period of time.

Unlike some other countries, however, LLPs in India don’t need to have at least one mandatory member with unlimited responsibility. All the members are entitled for limited liability. So this basically means that their liability may be just limited to the amount of capital they have invested into the business.

Some of the salient features of an LLP in India include:

  • An LLP has a separate legal status from its partners, and has perpetual succession
  • It’s governed only by the separate legislation (LLP Act, 2008), and none of the provisions of the Indian Partnership Act, 1932 are applicable to it
  • Every LLP should use “Limited Liability Partnership” or “LLP” as the last word of its name
  • LLP is basically a mix of both a ‘corporate entity’ and a ‘partnership business’
  • It’s mandatory for every LLP to have at least two partners, with one of them being a resident of India. The other partners shall be agents of the LLP, but not of other partners
  • While an LLP agreement isn’t mandatory, the rights and liabilities of the partners will be determined according to the Schedule I of the LLP Act in the absence of one
  • As the LLP is considered a separate legal entity, its partners and the LLP aren’t the same
  • Unlike a company, there aren’t any minimum capital requirements when it comes to an LLP. This means that the members don’t need to bring in any amount of capital, unless of course if required by the LLP agreement
  • Similarly, unlike the traditional partnerships, an LLP doesn’t even have any limit on the maximum number of members that can join it. It, however, does require a minimum of two partners for obvious reasons
  • Unlike private and public companies, an LLP doesn’t require compulsory audits. However, there are exceptions to this rule, as if the total capital of the LLP exceeds Rs. 25 Lakhs, or if the annual turnover turns out to be over 40 Lakhs, it would be mandatory to get the audit done


What are the Advantages of an LLP?

While we have already touched upon some of the major advantages of LLPs, there’s actually a lot more to it. So without further ado, let’s take a look at some of the most important advantages of an LLP.

Limited Liability – And Why It Matters So Much?

Well, we know it’s kind of obvious and we have already mentioned quite a bit about it. However, we still think it’s worth elaborating on this one even more as it’s such an important feature of an LLP.

Apparently, most partnership businesses in India end up failing. Hardly a few of all the ones that are started manage to last more than just 5 years. This is saying something, as many private and public companies tend to run quite effectively (while maintaining an impressive growth rate) for decades.

While there may be many reasons to blame for the lackluster performance of such traditional partnerships in India, one of the major ones would probably turn out to be the unlimited liability the partners are burdened with. Although it may not seem a big deal unless the business ends up making huge losses, there are actually many other things that get affected due to it that are often overlooked.

For instance, when the partners are aware of the fact that they may end up going bankrupt if things go terribly wrong, they will probably have a very careful and cautious approach, which isn’t exactly the way to go about managing a new business.

There are many other similar things as well that get affected due to unlimited liability, but hope you get the point.

Anyway, so that brings us back to arguably the greatest feature of LLPs, limited liability. It simply means that your personal property is never going to be attached to the business’ property, regardless of the losses it incurs.

Similarly, you also won’t be responsible for any losses arising out of another partner’s wrongdoings. The same goes in the event of a fraud or something – your personal property will surely not be included to pay off the liabilities of your business.

This is indeed a very relieving feature, as it also means less disagreements and arguments between the partners, as they would be aware that even if someone gets involved in some kind of misconduct, the other partners won’t be responsible for their actions.

Finally, you may also want to know that you would even be protected against any lawsuits that your business may come across. Even if the business fails to pay off the claims by the other party, you wouldn’t have to pay anything out of your pocket, including even the fees and charges for the lawsuit.

Helps Build Trust

Although LLPs have been introduced in India only recently, they have been a very popular type of business throughout the world from quite a long time. This is especially true when it comes to businesses offering different services, as they mostly tend to be LLPs.

Similarly, though LLPs aren’t as well-known in India as elsewhere in the world, they are still considered trustworthy. This is because LLPs are known to function more smoothly and effectively as compared to traditional partnerships.

Furthermore, they are also registered as a corporate body, which shows that the partners are serious about what they are doing, which perhaps isn’t the case when it comes to traditional partnerships (the registration being optional).

LLP Registration is a Breeze

LLP registration is indeed quite easy compared to the registration process that needs to be followed while starting a private or public company. While even starting a traditional partnership is easy enough, unlike LLPs, it doesn’t get a separate legal identity.

Perpetual Succession

An LLP, being a separate legal entity, has perpetual succession. This means that irrespective of the changes in the partners, it will continue to exist until its wound up legally. It will also continue to enjoy all the benefits for as long as it stays in existence, notwithstanding any changes that happen in its ownership or other any changes.


An LLP, despite being a body corporate, doesn’t compromise on the flexibility front. It allows the partners to run the LLP the way they want to, given their actions are in accordance with the LLP agreement.

Easy Transfer of Ownership

It’s easy to leave or join the LLP as a partner. Similarly, it’s also just as easy to transfer the ownership to a new partner, as long as it’s allowed by the agreement.

Taxation Benefits

This is another great advantage of an LLP. It has lower tax rates than companies, and is also not subjected to the Dividend Distribution Tax, meaning that it won’t be liable to tax while distributing the profits among the partners.

Easy to Attract Investors

As mentioned earlier, an LLP attracts investors way more easily than a small business or traditional partnership. After all, as it’s a regulated entity and tend to function more effectively, PE investors and financial institutions don’t hesitate before making an investment.


New LLP Registration

As mentioned earlier, LLP registration can actually be a breeze, especially when compared to registering other types of businesses.

That being said, here are steps involved while doing your LLP registration.

Obtaining the DIN or DPIN

For starting a new Indian LLP, you first need to obtain the DIN or DPIN (Designated Partner Identification Number). This is supposed to be done by all the designated partners of the LLP.

You can apply for it by filing an eForm DIN-1. However, if you have already got a DIN, you can use that as well.

Acquiring DSC

The Information Technology Act, 2000 requires all electronic documents to use Digital Signature Certificate (DSC) for ensuring the required level of security.

Only a licensed Certifying Authority (CA) can issue the DSC. A Certifying Authority (CA) is a person that has been approved to provide DSC by the Information Technology Act, 2000.

Apply for a Name

You then need to apply for your LLP’s name by filling out the Form 1. Depending on the type of LLP you want to register, you may even have to fill out the Form 2.

After the ministry approves your LLP’s name, you will get a confirmation email.

LLP Agreement

After you’re done with the LLP registration process and got it approved, you need to file your LLP agreement within 30 days. You need to use the Form 3 for doing this.

Converting into an LLP

If you’re an existing partnership and want to convert into an LLP, you need to fill out the Form 17 for doing so.

Similarly, you would need to use the Form 18 if you want to covert a private or unlisted public company into an LLP.

Starting a FLLP

If you want to start a Foreign Limited Liability Partnership (FLLP), you need to fill out the Form 27. While it isn’t mandatory for you to obtain a DIN or DPIN, you would still need to obtain the DSC.


LLP Registration Costs

The fee structure for LLP registration is actually pretty simple. So let’s just cut to the chase and take a look at the fee structure. This fee structure is applicable for LLP registration including conversion of a partnership firm, private or unlisted public company into an LLP.

For an LLP whose contribution isn’t more than Rs. 1 Lakh, the fee would be Rs. 500. Similarly, if the contribution is between Rs. 1 Lakh to Rs. 5 Lakhs, you will have to shell out Rs. 2,000.

For LLPs whose contribution is in the range of Rs. 5 Lakhs to Rs. 10 Lakhs, you would be looking at paying Rs. 4,000 in fees. Finally, if the contribution exceeds Rs. 10 Lakhs, the fees to be paid would turn out to Rs. 5,000.


A Final Word

The above given information is pretty much everything you need to know about the concept of LLPs, LLPs in India, as well as LLP registration.

LLPs seem to be the best type of business to go for currently. Apparently, the only downsides seem to be that an LLP isn’t allowed to raise funds from the public and the winding up process of an LLP is quite complicated.

However, these really aren’t downsides given you don’t plan to make your business go public or wind up anytime soon.