NRIs and foreign nationals have started or invested in a business in India primarily through a private limited company, as it allows 100% foreign direct investment (FDI) under the automated route in many sectors. Although the costs for the inclusion of a private limit company were relatively low, the efforts require to maintain compliance were a deterrent. To allow NRIs and foreign nationals to invest freely in industries in India and to improve foreign investments, the government has now allowed 100% FDI in LLPs under an automated route. In this article, we will look at the process for LLP incorporation for NRIs and foreign nationals.
LLP incorporation
Limited Liability Partnership (LLP) is one of the new types of business entities in India introduce in India through the Limited Liability Partnership Act, 200 through. Then,LLP incorporation in kerala started in India in 2008 and has quickly become popular among small businesses due to low incorporation costs and low. The requirement of compliance when compare with a private limited company.
Company Involvement: Involvement or investment in a private limited company is India’s entry strategy for NRIs and foreign nationals. 100% FDI under automate route is the main reason for the popularity of the private limited company among NRIs and foreign nationals.
Opening a branch office:
Also,Opening a branch office requires RBI approval and it is more difficult to process than involving a private limited company. In addition, only well-establish industries with good track record in financial matters are allo to open branch offices in India. Therefore, entry into India through the establishment of a branch office is not prefer by NRIs or foreign nationals.
Incorporation of LLP:
Prior to November 2015, government approval is require for investment in LLP by NRI or foreign national. This has resulted in LLPs involving NRIs and / or foreign nationals – a lengthy, cumbersome and expensive process. Thus, company incorporation was prefer by NRIs and foreign nationals over LLP incorporation in kerala. By relaxing FDI norms in November 2015, LRP incorporation can be easily done by NRIs and foreign nationals, making it an ideal investment vehicle for setting up a small business in India with foreign direct investment.
LLP incorporation process for NRIs and foreign nationals
A minimum of two people is need to register an LLP in India. The require for company incorporation in India is the same – it is recommend that at least one of the partners of the LLP be both an Indian citizen and an Indian resident. The process for LLP incorporation involves five major steps: digital signature, designated partner identification number, name approval, inclusion and LLP agreement filing.
Digital signature certificate
Obtain a Digital Signature Certificate (DSC) for the proposed partners of the LLP. DSC is require to obtain Designated Partner Identification Number (DPIN). To obtain a DSC, an NRI or foreign national must submit a signed DSC application along with a notarized copy of passport and address proof (driver’s license, residence card and more).
Designated Partner Identification Number
Partners in an LLP require a Designated Partner Identification Number (DPIN) and can obtain it after obtaining a DSC for the partner. DPIN can be use with the Director Identification Number (DIN) used in the company.
Name approval for LLP
Once two DPIN found, the application for reserve in the name of LLP can be submitted to the Ministry of Corporate Affairs (MCA). The application for name may contain six names which are acceptable under the LLP Act, 200. The name must be unique as per the norm of LLP Act and should not be like existing company or LLP name. Upon approval of any of the names, submit the insertion application within 60 days to complete the insertion. (Learn more about an acceptable name for a company or LLP).
Inclusion of LLP
Based on the name approval provided by the government, the partners of the LLP can submit an application to the government for the inclusion of the LLP, along with the required documents, including the customer’s sheet. If the application is acceptable, the MCA will provide an investment certificate for the LLP registration in Kerala,Trivandrum and the business can be started.
LLP contract filing
Upon inclusion of the LLP, the partners must sign the LLP agreement and sign it within 30 days. Failure to file an LLP agreement on time can result in heavy penalties that are levied on a daily basis. Therefore, it is important to enter into an LLP agreement quickly and complete the LLP inclusion process.
Benefits:
1. Convenient
Firstly,Starting and managing a business like entrepreneurs is easy. The LLP agreement is customize to suit the needs of the relevant partners. Areas like legal coordination, annual meeting, resolution have less formal formalities than any other private limited company. For a detailed comparison between LLP and Private Limited, read the selection between LLP and Private Limited.
2. No minimum capital requirement
Secondly,LLP can be start with lowest level amount of capital money. Capital can be tangible, movable property, land, machinery or intangible form. In case of private company (requirements for incorporation of private company) and public company (requirements for incorpotation of public company) capital requirement is Rs. 1, 00,000 and Rs. Respectively, 100,000 while there is no such compulsory capital requirement under LLP.
3. There are no limits on business owners
LLP partners can be as many as 2. There are no limits for partners in an LLP. An LLP requires a minimum of 2 partners while a private company has no limit on the maximum number of partners which is prohibit from having more than 200 members.
4. Lower incorporation costs
Thirdly,The cost of registering an LLP is lower than any other company (public or private). Read LLP, OPC, Private Limited, Partnership, Ownership Price Comparison.
5. Mandatory audit is not require
LLP is not require to audit accounts. Any other company (public, private) is require to have their accounts clear by an debt firm. LLPs must audit their account in the following situations:
While the contribution of LLP is Rs. 25 lakh, or
While the annual turnover of LLP is Rs. 40 lakhs
6. Savings from low compliance loads
LLPs will have to face less compliance burden as they have to submit only two statements i.e. annual return and statement of accounts and solvency. While in the case of a private company, at least 8 to 10 regulatory formalities and compliance must be properly complete. Read the annual price comparison of Private Limited and LLP.
7. Tax aspect on LLP
Similarly,LLP is not liable to pay tax on its partner’s income and shares. Thus, no dividend distribution tax is reward under section 40 (b). Bonus, commission or remuneration, interest to partners, any payment of salary, recognized as deduction. The provision for paying ‘Deemed Dividend’ under the Income Tax Act does not apply to LLPs.
8. (DDT) is not applicable
Finally,If the partners of the LLP withdraw the profit from the company, no additional tax liability is pay by the partners in the form of DDT. While in the case of a company, the owners have to pay DDT 15% (surcharge and educational cess) therefore, the profit of the LLP is in the hands of its partners, which can be easily withdrawn by the partners.