How to Start a Technology Service Business as an LLP in India : Provisions of LLP Act, 2008

Starting a technology service business in India as a Limited Liability Partnership (LLP) offers numerous advantages, including limited liability, flexible management structure, and tax benefits. The Limited Liability Partnership Act, 2008 governs the formation and regulation of LLPs in India. Here’s a step-by-step guide by Compliance Calendar LLP to help you establish your tech service business in the form of an LLP, highlighting relevant provisions of the LLP Act, 2008.

1. Limited Liability Partnership

An LLP combines the benefits of both a partnership firm and a company. It offers limited liability protection to its partners, meaning their personal assets are not at risk in case of business debts or liabilities. Additionally, LLPs are simpler to manage with fewer compliance requirements compared to company registration.

2. Choosing a Name

Select a unique and relevant name for your LLP. The name should not be similar to any existing business names / trademarks and must comply with the naming guidelines set by the Ministry of Corporate Affairs (MCA).

Relevant Provisions

• Section 15: The name of an LLP should not be identical or similar to an existing LLP or company.
• Section 16: The name must include “Limited Liability Partnership” or its abbreviation “LLP.”

3. Partner Requirements

An LLP must have at least two partners, who can be individuals or corporate entities. At least one partner must be an Indian resident. The partners can be actively involved in the business or act as silent partners.

Relevant Provisions

• Section 5: Any individual or body corporate can become a partner in an LLP.
• Section 6: An LLP must have at least two partners, and if the number of partners falls below two for six months, the single partner will be liable for the obligations of the LLP.

4. Obtaining a Digital Signature Certificate (DSC)

A DSC is required for online filing of documents with the MCA. Each designated partner must obtain a DSC from a government-recognized certifying authority.

5. Applying for Director Identification Number (DIN)

Each designated partner must apply for a DIN, which is a unique identification number for directors. This can be obtained by filing eForm DIR-3 with the MCA.

Relevant Provisions

• Section 7: Every designated partner must have a DIN or Designated Partner Identification Number (DPIN).

6. Filing for LLP Incorporation

File the incorporation documents online with the MCA using eForm FiLLiP (Form for Incorporation of LLP). This form requires details such as the proposed LLP name, partners’ details, registered office address, and more.

Relevant Provisions

• Section 11: Describes the incorporation document that must be filed with the Registrar.
• Section 12: Specifies the required contents of the incorporation document.

7. Drafting the LLP Agreement

The LLP agreement outlines the mutual rights and duties of the partners. It must be drafted and signed by all partners and then filed with the Registrar in Form 3 within 30 days of incorporation. The agreement typically covers aspects such as profit-sharing ratios, roles and responsibilities, and dispute resolution mechanisms.

Relevant Provisions

• Section 23: The LLP agreement must be in writing and filed with the Registrar.
• Section 24: Describes the extent of mutual rights and duties of partners.

8. PAN and TAN

As per the new process of Incorporation at MCA, the Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) for your LLP come along with the Certificate of Incorporation. These are essential for tax-related purposes.

9. Opening a Bank Account

Open a bank account in the name of the LLP to manage your business transactions. You will need the LLP incorporation certificate, PAN, and other relevant documents to open the account.

10. Registering for GST

If your business turnover exceeds the threshold limit (currently ₹20 lakhs for most states), you must register for Goods and Services Tax (GST). This registration allows you to collect GST from customers and claim input tax credits.

11. Complying with Other Legal Requirements

Depending on the nature of your technology service business, you may need additional licenses or registrations, such as the Shops and Establishment Act registration, professional tax registration, and more. You can also choose to register under Trade Marks, Import Export Code and get Startup India Recognition to avail various govt schemes.

12. Setting Up Your Business

Infrastructure

Set up the necessary infrastructure for your technology service business. This may include office space, computers, servers, software, and other tech-related equipment.

Hiring Staff

Recruit skilled professionals to help run your business. Ensure compliance with labor laws and provide necessary employee benefits.

Marketing and Sales

Develop a marketing strategy to promote your tech services. Utilize digital marketing, social media, and networking to reach potential clients.

13. Maintaining Compliance

Ensure regular compliance with LLP regulations, including annual filings, income tax returns, and maintaining proper books of accounts. Non-compliance can result in penalties and legal issues.

Relevant Provisions

• Section 25: Every LLP must maintain proper books of accounts.
• Section 34: LLPs must file an annual return with the Registrar.
• Section 35: Describes the consequences of failure to comply with filing requirements.

Conclusion

Starting a technology service business as an LLP in India offers a robust and flexible business structure. By following these steps and adhering to the provisions of the LLP Act, 2008, you can establish your tech business with ease and focus on growth and innovation. Remember, it is always beneficial to seek professional advice to ensure compliance and smooth operations. For more assistance with LLP registration and compliance, consider reaching out to experts like Compliance Calendar LLP, who can guide you through the entire process seamlessly.