The Limited Liability Partnership (LLP) structure offers multiple advantages like limited liability protection and operational flexibility to entrepreneurs and small business owners in India. With online LLP registration in India further simplifying the registration process, many small business owners prefer setting up an LLP company. However, navigating the paperwork and compliance requirements during LLP company registration can get confusing for first-timers. Even minor errors or omissions in submitting the registration documents can lead to processing delays or, worse still, rejection of your LLP registration application.
By being aware of the common mistakes others make, you can avoid those pitfalls and ensure smooth sailing in your LLP company registration journey. This article covers ten such errors you need to steer clear of when register a LLP company in India. Carefully go through these pointers on what not to do when registering your LLP.
Not Choosing the Right Name
The very first step towards LLP registration in India is picking the right name. Some common issues that crop up at this stage are:
- Selecting a name already registered by another company/LLP
- Opting for a name regulator find too generic or misleading
- Using words like ‘Bank’ or ‘Exchange’ that require additional approvals
- Not following the name approval rules regarding use of special words, phrases etc.
To avoid rejection of your preferred LLP name, thoroughly check name availability and adhere to the LLP name guidelines before seeking approval.
Not Having the Required Partners
For a regular LLP in India, at least two designated partners are mandatory at the time of incorporation. Failing to meet this basic criterion can lead to cancellation of registration. If you are starting the LLP alone right now, show at least one other designated partner and make them a partner later after registration formalities are done.
Not Appointing the Right Designated Partners
Every LLP should appoint designated partners (DPs) who are responsible for compliance and managing regular operations. Any Indian resident with a DPIN and no prior DP disqualification can be appointed as a DP. However, problems can arise if:
- The proposed DPs already serve as DPs in another LLP
- Their DPIN status is inactive or they are disqualified to act as DPs
- Approval from RBI/other authorities not obtained for DP appointments in certain cases
So ensure you appoint only eligible designated partners without any restrictions to avoid hassles later.
Submitting Faulty Documents
When applying for LLP company registration in India, you have to submit various documents like proof of registered office address, partner/DP consents, identity/address proofs etc. Common errors made in preparing these registration documents are:
- Unsigned consent letters from partners/DPs
- Expired address proofs of registered office and/or partners
- Identity documents without clear photographs or other required details
- Incomplete office documents without required attestations
Double check all documents prepared for LLP company registration before filing to ensure everything is in order. Use the latest compliant templates to avoid document errors.
Not Having a Valid Office Address
As part of the LLP registration process, you have to provide details of the registered office address where all communications will be sent. Often partners just give their residential address instead of a proper office space. Or, the address provided is invalid, not traceable or located in commercial/residential restrictions areas.
This can lead to notice of deficiencies, rejection of your LLP registration application or inability of authorities to send communications in future. So, ensure you have a valid commercial workspace proof before LLP company registration in India.
Making Errors in LLP Agreement
The LLP Agreement outlines the mutual rights and duties of partners along with LLP operations details. Unfortunately, partners often commit silly mistakes here like:
- Not covering all necessary clauses in the LLP agreement
- Inconsistent details in different sections of agreement
- Contradictory or missing nomination details of partners
- Spelling errors, incorrect citations, typos etc.
Take time to carefully draft a comprehensive agreement without any discrepancies before LLP company registration.
Not Planning the Capital Contribution
Partners need to state their proposed capital contribution in the incorporation documents for LLP registration. Often partners randomly state any odd figure here just to meet this compliance without planning.
Later when actual capital infusion is required as per the projection in records, partners struggle to arrange the funds. So have a realistic, achievable capital plan right from the LLP registration stage to avoid such troubles.
Choosing the Wrong Registration Package
LLP company registration can be done via various packages – regular, fast-track, hybrid etc. Often partners opt for a cheaper package to save costs without considering applicable timelines. For instance, the regular process takes 15-20 days so is useless when you want to urgently close a pending business deal via the LLP route.
Similarly opting for pricier fast-track registration without any real urgency is overkill. So carefully evaluate time, costs and registration requirements before picking the LLP registration package.
Not Planning Post-registration Compliances
After LLP company registration in India, various post-incorporation legal and tax compliances apply as per LLP Act 2008. If promoters are unaware of these regular LLP compliance requirements, they risk non-compliance penalties later.
Right from LLP registration stage do your homework on applicable post-registration compliances, due dates and processes so you can plan accordingly.
Picking an Unreliable Partner for Registration
LLP company registration in India requires multiple document filings, forms and clearances across various portals and agencies. If your consultant or partner does not know the registration process thoroughly or has limited digital capabilities, things can get stuck at various steps.
This causes significant delays and rework challenges during LLP registration, increasing overall hassles. Always pick an experienced registration expert with end-to-end digital capabilities for smooth sailing.
Conclusion
While the LLP structure offers lots of flexibility and benefits for entrepreneurs, the registration process itself has many intricacies. By avoiding the common LLP registration mistakes discussed here, you can ensure your LLP registration online in India happens smoothly without any hiccups.
Do your homework beforehand on the LLP registration rules and requirements, carefully prepare compliant documents, appoint qualified designated partners and have a clear post-registration compliance plan even before you begin the registration formalities.
This helps avoid many complexities and issues later on. Also work with a reliable LLP registration specialist to make the registration process quick and headache-free right from start.
