Limited Liability Partnership (LLP) Registration with Foreign Directors

Last Updated On: Sept. 21, 2021, 10:28 p.m.
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LLP REGISTRATION WITH FOREIGN DIRECTORS

The ministry of corporate affairs (MCA) launched a new scheme to provide one-time amnesty to non-compliant LLPs in the wake of the COVID-19 outbreak. Under the LLP settlement scheme, 2020, defaulting LLPs have been allowed a one-time waiver of penalties if they complete their delayed filing of certain statutory documents by 30 September 2020. The registrar will initiate no proceedings and prosecution till then.

NRIs and foreign nationals starting or investing in a business in India have mainly done through a private limited company. It allowed the LLP registration for 100% foreign direct investment (FDI) under the automatic route for many sectors. Though the cost for incorporating a private limited company is relatively low compared, the effort required to maintain compliance was an inhibiting factor. Foreign national as a partner in LLP is easy to make. To allow NRIs and foreign nationals to invest in businesses in India and improve foreign investment freely, the government has now allowed 100% FDI in LLP under the automatic route. Let’s see the registration of a limited liability partnership with foreign directors, which involves the LLP directors.

 

LLP Registration

Limited liability partnership (LLP) is one of India’s newest forms of business entity introduced through the Limited Liability Partnership Act, 2008. LLP registration started in India in 2008 and has quickly become popular amongst small businesses due to the low registration cost and lesser compliance requirement compared to a private limited company.

 

Registration of LLP

Before November 2015, investment in LLP by NRI or foreign nationals required government approval. This made LLP incorporation involving NRIs and/or foreign nationals – a long, cumbersome and expensive process. Thus company registration was preferred over LLP registration by NRIs and foreign nationals. With the relaxation of FDI norms in November 2015, LLP registration can be done quickly by NRIs and foreign nationals, making it an ideal investment vehicle for establishing a small business in India with foreign direct investment.

 

FDI in LLP

Post changes to FDI regulations in November 2015, 100% FDI in LLP is now permitted under the automatic route. 100% FDI in LLP is allowed for businesses operating in sectors/activities where 100% FDI is allowed through the automatic route, and there are no FDI-linked performance conditions. Besides, LLPs will also be permitted to make downstream investments in another company or LLP in sectors in which 100% FDI is allowed under the automatic route, and there are no FDI-linked performance conditions. Therefore, FDI in LLP is now allowed, and NRIs or foreign nationals can start or invest in an LLP.

 

Procedure for LLP Registration with Foreign Directors:

As per the law, the two designated partners are required for the LLP registration in India. The nationality of the partners plays a vital role in such registration. Individuals seeking LLP registration should make sure that at least one of the forming partners should be an Indian national, as it is mandatory. The LLP registration can be completed in five significant steps, namely:

  • Availing Digital Signature
  • Identification number of the founding partner, aka DPIN.
  • Approval of the name.
  • Filing of LLP agreement and Incorporation.
  • LLP Registration Procedure for NRIs and Foreign Nationals
  • A minimum of two people is required to register an LLP in India. At least one of the partners of the LLP is recommended to be both an Indian citizen and an Indian resident – similar to the requirement for registration of the company in India. Further, the procedure for LLP registration involves five significant steps: digital signature, designated partner identification number, name approval, incorporation, and LLP agreement filing.

 

Digital Signature Certificate

A digital signature certificate (DSC) must be obtained for the proposed partners of the LLP. DSC is necessary for obtaining a designated partner identification number (DPIN). To obtain DSC, the NRI or foreign national must submit the signed DSC application along with a notarized copy of passport and address proof (driver’s licence, residence card and more)

 

Designated Partner Identification Number

Partners in an LLP require a designated partner identification number (DPIN) and it can be obtained once DSC is obtained for the partner. DPIN can be used with the director identification number (DIN) used to incorporate a company.

 

Name Approval for LLP

Once two DPINs are available, an application for reservation of the name of LLP can be made to the Ministry of Corporate Affairs (MCA). The application for the name can contain up to six names that are acceptable as per the LLP Act, 2008. The name must be unique, as per the norm of the LLP Act and must not be similar to an existing company or LLP name. Moreover, the application can be filed within 60 days to complete the incorporation if the name is approved.

 

Incorporation of LLP

Based on the name approval provided by the government, the partners of the LLP can apply for incorporation of LLP to the government along with the necessary documents, including the subscribers’ sheet. Additionally, if the application is acceptable, MCA will provide an incorporation certificate for the LLP, and business can commence.

 

LLP Agreement Filing

On incorporation of the LLP, the LLP agreement must be signed and filed by the Partners within 30 days. Failure to file an LLP agreement on time could result in a heavy penalty that accrues daily. Hence, it is important to quickly file the LLP agreement and complete the LLP incorporation process.

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