Making Your LLP Operationally and Legally Ready
By CA Surekha S. Ahuja
Introduction: Formation Is Only the First Step
In Part I, we explored why MCA approval does not mean your LLP is fully functional.
Structure, sequencing, DIN planning, and FEMA compliance lay the foundation.
Part II is about making the LLP legally and operationally ready — ensuring the entity you’ve incorporated can actually operate, onboard a bank, accept capital (including NRI funds), and avoid compliance pitfalls.
Drafting the LLP Agreement: The Heart of Your LLP
The LLP Agreement is more than a formality; it governs relationships, profit-sharing, and compliance responsibilities. For LLPs with three or more partners — particularly where an NRI is involved — clarity is essential.
Key aspects to cover:
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Decision-making: Define whether decisions require a simple majority, 2/3 majority, or unanimity.
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Profit-sharing: Clearly specify percentages (equal, capital-based, or hybrid).
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Designated Partners: Identify who is responsible for regulatory compliance.
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Admission and Exit: Specify the process for adding or removing partners.
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Capital Contribution & FEMA Compliance: Especially important for NRIs to avoid regulatory exposure.
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Dispute Resolution: Include arbitration, mediation, or court provisions.
Skipping any of these leaves the LLP vulnerable to disputes, audit queries, or bank delays.
Stamp Duty Compliance: Delhi Example
Stamp duty ensures that the LLP Agreement is legally enforceable. While it is a small step, incorrect handling can invalidate the agreement for banks or regulatory authorities.
Delhi Stamp Duty (for three partners):
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Rate: 1% of total capital contribution
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Maximum cap: ₹5,000
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Payment: Via SHCIL e-Stamping or nearest center
Example Calculation:
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Partner A: ₹50,000
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Partner B: ₹50,000
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Partner C: ₹50,000
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Total capital: ₹1,50,000 → 1% stamp duty = ₹1,500
Execution steps:
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Use Article Code 46 (LLP Agreement)
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List LLP as first party, “Partner A & Others” as second party
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Print first page of agreement on e-stamp paper
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Signatures: All partners + two witnesses
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Notarization: Recommended for Delhi
Other cities for context:
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Mumbai: 1% of capital (max ₹15,000)
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Bangalore: Slab-based, ~₹2,000 for >₹1 lakh
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Chennai: Flat ₹300
Timing matters — execute stamped LLP Agreement before bank submission.
Bank Onboarding: Ensuring Smooth Acceptance
Banks often reject LLP accounts because critical compliance steps are missing. For a smooth process:
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LLP Agreement executed and stamped
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Certificate of Incorporation, PAN, TAN, DINs of designated partners
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Proof of registered office (utility bill + NOC)
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Capital deposited via proper banking channels
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NRI partners: Confirm FEMA compliance
A missing document, even if minor, can stall opening of current accounts or international remittances.
Post-Formation Filings
After execution, the LLP must ensure:
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Form 3: Filing of LLP Agreement
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Form 4: Appointment of partner(s) added post-incorporation
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Form LLP(I) & LLP(II): Required when NRI capital is introduced
Timely compliance avoids penalties, notices, or audit challenges.
Indicative Cost Framework (Delhi, Three Partners, Total Capital ₹1.5L)
| Item | Estimated Cost | Notes |
|---|---|---|
| DSC (3 Partners) | ₹4,500 – ₹6,000 | Market rate |
| Name Reservation | ₹200 | MCA fee |
| Form FiLLiP | ₹500 | MCA fee |
| Stamp Duty | ₹1,500 | 1% of ₹1.5L, Delhi |
| Form 3 Filing | ₹50 | MCA fee |
| Form 4 Filing | ₹50 | If 3rd partner added later |
| Professional Fees | ₹5,000 – ₹15,000 | CA/CS fees |
| Total Estimate | ₹12,000 – ₹23,000 | Inclusive of basic professional support; costs may vary by state, capital, or professional |
This is an indicative estimate. Professional fees and stamp duty may vary depending on location, capital, and service provider.
From Legal Existence to Operational Reality
Formation creates the LLP on paper.
True operational readiness comes only when:
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LLP Agreement is drafted, stamped, and executed
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Banks accept the entity for account opening and transactions
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Post-formation filings are completed
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FEMA compliance (if any NRI capital) is ensured
Skipping these steps leaves the LLP existing only in records, not in practice.
A compliant LLP from day one saves years of regulatory challenges, bank delays, and partner disputes.
