Showing posts with label OPC. Show all posts
Showing posts with label OPC. Show all posts

Monday, August 31, 2020

Limited Liability Partnership (LLP) Registration

Limited Liability Partnership (LLP) Registration

Limited Liability Partnership (LLP) was introduced in India by way of the Limited Liability Partnership Act, 2008. The basic premise behind the introduction of Limited Liability Partnership (LLP) is to provide a form of business entity that is simple to maintain while providing limited liability to the owners. Since its introduction in 2010, LLPs have been well received with over one lakh registrations in India. 

LLP is one of the easiest types of business to incorporate and manage in India. With an easy incorporation process and simple compliance formalities, LLPs are preferred by Professionals, Micro and Small businesses that are family-owned or closely-held. Since LLPs are not capable of issuing equity shares, LLP should NOT be chosen for any business that has plans for raising equity funds from Angel Investors, Venture Capitalist or Private Equity Funds. 

Difference between LLP & Partnership

Cost: The cost for registration of LLP is normally higher than the cost for registration of a partnership firm.

Authority: LLPs are registered in India under the Ministry of Corporate Affairs, Central Government. Partnership firms are registered with the Registrar of Firms, controlled by the respective State Government in which the firm is registered. 

Limited Liability Protection: The main advantage of a Limited Liability Partnership over a traditional partnership firm is that in a LLP, one partner is not responsible or liable for another partner's misconduct or negligence. A LLP also provides limited liability protection for the owners from the debts of the LLP. However, unlike private limited company shareholder, the partners of an LLP have the right to manage the business directly. 

Number of Partners: LLPs and Partnership Firms must have a minimum of two partners to be registered. Post incorporation, an LLP can have unlimited partners. In case of a Partnership Firm, if the number of partners at any time reduces below the mandatory minimum of 2 due to death, incapacitation or resignation of a Partner, the partnership firm would stand dissolved. On the other hand, in case of an LLP, if the number of Partners reduces below 2, the sole Partner can still find a new Partner to fill the position without dissolution of the LLP. 

Difference between LLP & Company

Private limited company registration process and the LLP registration process are similar with some differences in the documents and forms filed for incorporation. 

Cost: The cost for the incorporation of a private limited company or an LLP is almost the same.

Features: Both LLP and Private Limited Company offer many of the same features. LLP and Private Limited Company are both separate legal entities and have assets and liabilities that are separate from that of the promoters. LLP and Private Limited Company are both transferable, though a Private Limited Company offers more flexibility when it comes to transferring or sharing of ownership. LLP and Private Limited Company both have perennial life, unless and otherwise closed by the promoters or competent authority. 

Fund-raising: A private limited company can raise funds from Angel Investors, Private Equity Funds, Venture Capitalists, banks and NBFCs. An LLP can raise funds from Partners, Banks and NBFCs. 

Non-Resident Indian (NRI) & Foreign Ownership of LLP

Post changes to FDI regulations on 10th, November 2015, 100% FDI in LLP is permitted under the automatic route. In most sectors, 100% FDI in LLP is allowed through the automatic route, and there are no FDI-linked performance conditions. In addition, LLPs will also be permitted to make downstream investment in another company or LLP in sectors in which 100% FDI is allowed under the automatic route. Therefore, FDI in LLP is now permitted, and NRIs or Foreign Nationals can start or invest in an LLP. 

Documents Required for LLP Incorporation 

The following are the documents required for registration of LLP in India:

 For the Partners

  • PAN Card or Passport for Foreigners.
  • Driver’s license or Aadhaar card, residence card or election identity card or any other identity proof issued by the Government.
  • Less than 1-month old bank statement or telephone bill. 

Registered Office Proof

The authorization from the Landlord (as per Landlord's Name mentioned in the Electricity Bill or Gas Bill or Water Bill or Property Tax Receipt or Sale Deed) to use the premises by the company as its registered office. This is usually referred to as NOC from Landlord; AND 

Proof of evidence of any utility service like telephone, gas, electricity, etc. depicting the address of the premises in the name of the owner or document, which is not older than one month. 

LLP Registration Process

The average time taken to complete an LLP registration is about 15 - 20 working days, subject to government processing time and client document submission. At the start of the engagement, your Engagement Manager will reach out to you for the collection of the necessary information or documents for registration of LLP. The data can be submitted online through WhatsApp or email. 

Once the information is received, it is verified by the Engagement Manager, the process for obtaining Digital Signatures for the Partners of the LLP would be initiated. On submission of the digital signature application, the applicant would have to complete OTP verification and a video KYC check. In parallel to the digital signature application process, we also file a request with the MCA for reserving the name of the LLP - you had selected. 

On obtaining the name approval and the digital signatures, we would draft all the incorporation documents for the registration of the LLP and sent it to the Partners for signature. All the Partners must sign the document and send a scanned copy of the signed document. 

The signed incorporation documents are submitted by us along with the application for the incorporation of LLP to the MCA. The approval from MCA can take anywhere between 3 to 6 working days. Once the approval is obtained, the LLP would be incorporated, and we begin the process of helping you obtain PAN for the LLP and opening of bank account in the name of the LLP. In parallel, we also draft the LLP Partnership Deed. All the partners of the LLP must sign the LLP Partnership Deed on stamp paper, and the signed copy must be uploaded within 15 days of incorporation. The signed LLP partnership deed is then verified and uploaded on the MCA portal within 20 days of incorporation to complete the LLP registration process. 

Post-Incorporation LLP Compliance

After incorporation you need to maintain the basic accounting and compliance for your LLP.

The following are compliance that a LLP must complete each year:

Income Tax Return: LLPs must file income tax return using Form ITR 5. Form ITR 5 can be filed online through the income tax website using the digital signature of the designated partner. 

MCA Annual Return: LLP Form 11 is due on or before 30th of May each year. Form 11 contains details of the number of designated partners, total number of partners, total contribution received by all partners, details of body corporate as partners and summary of partners. 

In addition to LLP Form 11, Form 8 must be filed within 30 days from the end of 6 months of the financial year along with some prescribed fee. Hence, LLP Form 8 would be due on or before 30th October of each financial year. 

In addition to the above, GST registration, GST return filing and TDS return filing would be required for the LLP - based on the sales turnover and various other criteria. 

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Sunday, August 23, 2020

One Person Company (OPC) Registration

One Person Company (OPC) Registration

The concept of One Person Company in India was introduced through the Companies Act, 2013 to support entrepreneurs who on their own can start a venture by allowing them to create a single person economic entity. One of the biggest advantages of a One Person Company (OPC) is that there can be only one member in an OPC, while a minimum of two members are required for incorporating and maintaining a Private Limited Company or a Limited Liability Partnership (LLP). Like a Private Limited Company, a One Person Company is a separate legal entity from its promoter, offering limited liability protection to its sole shareholder, while having continuity of business and being easy to incorporate. 

Though a One Person Company allows a lone Entrepreneur to operate a corporate entity with limited liability protection, an OPC does have a few limitations. For instance, every One Person Company (OPC) must nominate a nominee Director in the MOA and AOA of the Company, who will become the owner of the OPC in case the sole Director is disabled. Also, a One Person Company must be converted into a Private Limited Company if it crosses an annual turnover of Rs.2 crores and must file audited financial statements with the Ministry of Corporate Affairs at the end of each Financial Year like all types of Companies. Therefore, it is essential for the Entrepreneur to carefully consider the features of a One Person Company before incorporation. 

OPC in India

The concept of One Person Company in India was introduced by Dr. Jamshed J. Irani in his Report on Company Law dated 31st May, 2005. As per the report, Dr. Irani recommended that with the increasing use of information technology and emergence of a strong service sector in India, it was time for the Government to empower entrepreneurs who on their own are capable of developing ideas and participating in the marketplace. He suggested that entrepreneurs who on their own are capable of starting a venture should not be made to do it through an association of persons, and should be able to create a single person economic entity in the form of ‘One Person Company’. Further, it was also suggested that such an entity may be provided with a simpler regime through exemptions so that the single entrepreneur is not compelled to fritter away his time, energy and resources on procedural matters. 

This led to the introduction of “One Person Company” in the Companies Bill 2013, which got its assent in the Lok Sabha on 18 December 2012 and in the Rajya Sabha on 08 August 2013. After obtaining the assent of the President of India on 29 August 2013, it has become the Companies Act, 2013. 

Benefits of One Person Company

Till the introduction of One Person Company in India, the Limited Liability and Continuous Existence feature was only available to an association of persons such as a Private Limited Company or Limited Liability Partnership or a Limited Company. With the introduction of One Person Company, the limited liability and continuous existence feature is now available for One Person Company also, which is an entity with just one member. As One Person Company has just one member, it is necessitated by the law for the single member of the Company to designate another person (as his/her nominee to continue the business activities of the OPC) in the Memorandum of Association, who on the event of subscriber’s death or incapacity shall become the person to contract. This mechanism provides an adequate safeguard to ensure continuous existence of the entity even in case of incapacitation of the single member. 

All companies in India are required to hold an annual general meeting each year, in addition to holding any other meetings and not more than fifteen months should elapse between the dates of subsequent annual general meetings. One Person Company is exempt from holding an annual general meeting or extraordinary general meetings. The resolution signed by the single Director and entered into the minutes book is sufficient, in lieu of a General / Extraordinary General Meeting. Every company in India is required to prepare and file financial statements that includes balance sheet, profit and loss account, cash flow statement, statement of changes in equity and explanatory notes. In case of One Person Company, cash flow statement is not required. 

OPC Registration Process

Before exploring the concept of a one person company, let us have a brief understanding of the various types of companies that can be formed. 

A company can be established for a lawful purpose by the following number of persons: 

  • Seven or more persons, in case of a public limited company.
  • Two or more persons, in case of a private limited company.
  • One person, in case of a one-person company.

 OPC Requirements

Unlike a private limited company, a one person company has certain restrictions associated with its incorporation. Hence, before starting an OPC registration, its essential to understand the constraints and ensure the promoter is eligible as per the Companies Act to register an OPC. 

  1. Only a natural person who is an Indian Citizen and resident in India can incorporate OPC.
  2. It means Legal entities like Company or LLP cannot incorporate a OPC.
  3. Resident in India means a person who had resided in India for a period not lesser than 182 days in the prior calendar year.
  4. The minimum authorised capital is Rs 1,00,000/-.
  5. A nominee must be appointed by the promoter during incorporation.
  6. A person can incorporate not more than one OPC.
  7. Businesses involved in financial activities cannot be incorporated as a OPC.
  8. OPC must be converted in to a private limited company when paid-up share capital exceeds Rs.50 lakhs or turnover crosses Rs.2 crores. 

Thus, a one-person company can be formed by an Indian citizen who has his/her presence in India for at least 182 days during the immediately preceding calendar year. Finally, an OPC is prohibited from having a minor as its member. 

Nominee in One Person Company

The rules for incorporation of one person company requires that the sole member of a One Person Company should include the name of a nominee in the Company's MOA, who will undertake the entity after the expiry or incapacity of the promoter. Moreover, the document must contain the written consent of the nominee, which must also be filed with the Registrar during incorporation along with the MOA and AOA. 

Withdrawal of Consent

The nominee is entitled to withdraw his/her consent, in which case the sole member is required to nominate another member as a legal heir within 15 days of the notice of withdrawal. The nomination of new person must be intimated to the Company through a written consent in Form INC-3. The Company, in turn, is required to file the notice of withdrawal of consent along with the intimation of the new nominee with the Registrar of Companies in Form INC-4. 

Change of Nominee

The sole member of a 'One Person Company' is empowered to change the nominee of the Company for any reason whatsoever, by providing notice in writing to the Company. Again, the new nominee must consent to the nomination in Form INC-3, and the Company must file the notice of change and consent of the nominee with the Registrar along with the applicable fee, within 30 days of receiving the intimation of change. 

New Nominee Appointment

If a nominee becomes in-charge of the one person company due to the cessation of the original member's term owing to the death or incapacity of the latter, the new member must appoint a nominee as a replacement. 

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