Partnership Firm Registration in Delhi

Who Can Be a Designated Partner in LLP?

Only individuals can be Designated Partners in an LLP. As per the Limited Liability Partnership Act, 2008, a minimum of two Designated Partners is mandatory, and at least one must be an Indian resident. This designation is crucial for ensuring legal compliance, managing financial responsibilities, and fulfilling statutory obligations within the LLP.

Who Can't Be a Designated Partner?

• Undischarged insolvents
  
• Individuals declared insolvent or who have withheld creditor payments in the last five years
  
• Those imprisoned for six months or more for offences involving moral turpitude
  
• Minors below 18 years
  

The Central Government holds the authority to annul these disqualifications if deemed necessary.

Designated Partner Identification Number (DPIN)

Every Designated Partner in an LLP must obtain a Designated Partner Identification Number , also referred to as a Director Identification Number (DIN). This unique number is mandatory for LLP registration and compliance. To obtain a DPIN, you need a Class 2 digital signature, which ensures secure authentication.

All partners in an LLP are eligible to become Designated Partners, but only those specified in the incorporation document hold this role at the time of registration. The LLP Partnership Deed allows rotation of the Designated Partner role, enabling different partners to take on responsibilities with mutual consent. This flexibility ensures equal participation while maintaining compliance with LLP regulations.

Documents Required for Becoming a Designated Partner

To become a Designated Partner in an LLP, you need to apply for a Designated Partner Identification Number. For this, you must submit the following documents:

• Identity Proof – A self-attested or certified copy of a document that includes your photograph, date of birth, and father’s or husband’s name (such as an Aadhaar card, PAN card, or passport).
  
• Residential Proof – A self-attested or certified copy of an address proof like a utility bill, bank statement, or rent agreement.
  
• For Nominees of a Body Corporate – A resolution or authorisation letter from the company mentioning their name and address is needed.
  
• For Foreign Nationals – A valid passport copy is needed.
  

Authorities for Attestation/Certification

Certain officials and professionals can attest or certify documents needed for a Designated Partner Identification Number . These include:

• Gazetted officers from the Central or State Government
  
• Notaries public
  
• Practicing professionals like Company Secretaries, Chartered Accountants, or Cost and Works Accountants
  

While attesting documents, the authority must include their name in capital letters, registration number, ministry or department details, and an official seal or stamp. This ensures the documents are valid and accepted for DPIN approval.

Translation Certificate

If your documents are in a language other than Hindi or English, you must attach a translated copy. This translation must be certified and attested to meet compliance requirements. It ensures that authorities can verify the details correctly and process the application without delays.

Appointment of Designated Partner

At least two individuals must be appointed as Designated Partners when registering an LLP. If a Designated Partner leaves the LLP, a new one must be appointed within 30 days. Failing to do so will result in all partners being considered Designated Partners, which may lead to compliance issues. To complete the appointment process, the following forms must be submitted:

To appoint a Designated Partner, the following forms must be submitted:

• Form 9 – This form records the consent of an individual to become a Designated Partner.
  
• Form 4 – It contains details of individuals who have given their consent to take on the role.
  
• Form 10 – This form is used to notify any changes made by the Designated Partners.
  
• Form 5 – Every LLP must submit this form to the registrar, providing details of individuals who have consented to become Designated Partners. It must be filed within 30 days of the appointment.
  

Related Read: What is LLP Form 11?

Government Fee for Appointment of Designated Partner

The government charges a fee based on the LLP’s contribution when appointing a Designated Partner. The fee structure is as follows:

• ₹50 – If the LLP’s contribution is up to ₹1,00,000
  
• ₹100 – If the contribution exceeds ₹1,00,000 but is limited to ₹5,00,000
  
• ₹150 – If the contribution exceeds ₹5,00,000 but is limited to ₹10,00,000
  
• ₹200 – If the contribution exceeds ₹10,00,000
  

Related Read: Complete LLP Registration Fees Guide

Duties and Responsibilities of a Designated Partner

• Signing the Statement of Account and Solvency: The Designated Partner must sign the Statement of Account and Solvency, confirming the financial position of the LLP. This document is crucial for transparency and is filed annually.
  
• Filing Annual Returns on Time: It is the Designated Partner’s responsibility to ensure that the LLP files its annual returns within 60 days of the financial year’s closure. Late filing can result in penalties and legal complications.
  
• Filing Additional Documents: The Designated Partner must submit any other documents requested by regulatory authorities to comply with legal requirements.
  
• Cooperating with Inspectors: During investigations or inquiries, the Designated Partner is required to cooperate with inspectors, providing necessary documents and signing examination notes to verify accuracy.
  
• Reimbursing Investigation Expenses: In the case of investigations, the Designated Partner is responsible for reimbursing the costs incurred, such as those related to audits or compliance checks.
  

Penalty for Not Having a Designated Partner

Every LLP is required to have at least two Designated Partners at all times. Failing to comply with this requirement incurs a penalty starting at ₹10,000, which can increase to ₹5,00,000.

If a Designated Partner exits the LLP and is not replaced within 30 days, the LLP will face similar penalties. Non-compliance with this rule can lead to legal and financial consequences, making it essential for LLPs to appoint and maintain the required number of Designated Partners.

Rights of a Designated Partner

Decision-Making Rights

A Designated Partner holds significant decision-making authority within an LLP. They are involved in making key business decisions, including formulating policies, setting operational strategies, and managing the financial aspects of the LLP. Their role is vital in ensuring that the LLP functions efficiently and adheres to its business goals.

Profit-Sharing and Financial Rights

A Designated Partner is entitled to a share of the profits generated by the LLP, with the exact share determined by the LLP agreement. This agreement outlines how profits and losses are distributed among the partners, ensuring that the Designated Partner receives a portion based on their involvement and the terms set forth.

Additionally, they have financial rights concerning capital contributions and can receive distributions and benefits according to the LLP's agreed financial terms.

Right to Access LLP Records and Documents

A Designated Partner has the right to access all official records and documents of the LLP. This includes financial statements, tax filings, agreements, and any legal documents related to the firm’s operations. This right ensures transparency within the LLP, allowing the Designated Partner to make informed decisions and stay updated on the company’s financial and legal status.

Liabilities of a Designated Partner

Liabilities in Case of Non-Compliance

A Designated Partner is responsible for ensuring that the LLP complies with all relevant legal requirements. Failure to comply with regulations such as filing annual returns or paying taxes can result in penalties, fines, and legal action that impacts both the LLP and the individual partner.

Legal and Financial Liabilities Under the LLP Act

Under the LLP Act, 2008, a Designated Partner may be personally liable if the LLP violates legal obligations. This includes non-payment of statutory dues, failure to meet regulatory requirements, or failure to comply with financial disclosures. In such cases, the Designated Partner is expected to take responsibility for rectifying the situation, with potential legal and financial penalties if the issue remains unresolved.

Situations Where Personal Liability May Arise

Although an LLP offers limited liability protection, there are circumstances where a Designated Partner could be personally liable. If involved in fraudulent activities, misrepresentation, or intentionally ignoring legal obligations, the Designated Partner may face personal liability. This could result in the loss of personal assets or legal actions separate from the LLP’s legal structure.

Frequently Asked Questions

Shelf Prospectus Meaning

A shelf prospectus is a document issued by companies intending to offer securities in multiple tranches over a specified period without filing a new prospectus for each offering. Governed by the Companies Act of 2013, it serves as a framework to streamline capital-raising activities while ensuring regulatory compliance.

This approach helps all types of companies save time and resources while maintaining transparency in financial disclosures.

What Is The Validity Period of Shelf Prospectus?

As per the Companies Act of 2013 and SEBI regulations, a shelf prospectus is valid for one year from the issue date. During this period, the company can make multiple security offerings without submitting a fresh prospectus.

However, an Information Memorandum must be filed for each subsequent offering to ensure updated financial and operational disclosures.

What Are The Requirements For Shelf Prospectus?

To issue a shelf prospectus, a company must fulfil specific requirements under the Companies Act, 2013:

• Eligibility Criteria: The company must be a public financial institution, a bank, or a company notified by SEBI.
  
• SEBI Approval: Approval from the Securities and Exchange Board of India (SEBI) is mandatory before issuance.
  
• Financial Disclosures: The prospectus must include audited financial statements, business details, and risk factors.
  
• Regulatory Compliance: The company must adhere to statutory provisions and filing requirements.
  

Who Can Issue Shelf Prospectus?

Not all companies are eligible to issue a shelf prospectus. As per SEBI regulations, only specific entities can do so, including:

• Public Financial Institutions such as banks and NBFCs.
  
• Scheduled Banks that meet regulatory criteria.
  
• Other Companies notified by SEBI, provided they meet compliance standards.
  

Looking to register your LLP? Head over to Razorpay Rize and get your LLP incorporated today!

What Are The Eligibility Criteria For a Company to Issue a Shelf Prospectus?

To issue a shelf prospectus, a company must meet the following key eligibility criteria:

• Strong Financial Performance: A consistent and positive financial track record is essential.
  
• Regulatory Compliance: The company must have a history of timely filings and adherence to statutory norms.
  
• Market Reputation: A credible and trustworthy market presence is necessary.
  
• Clear Disclosure of Fund Utilization: The company must provide transparency regarding how the raised funds will be used.
  

5 Incredible Advantages of Shelf Prospectus

A shelf prospectus offers several benefits to companies and investors:

1. Flexibility: Companies can issue securities as needed without additional regulatory approvals.
2. Cost Efficiency: Reduces administrative and compliance costs associated with repeated filings.
3. Faster Time to Market: Companies can respond quickly to market conditions.
4. Improved Investor Relations: Provides transparency and trust through consistent financial disclosures.
5. Strategic Financial Planning: Enables better capital-raising strategies over time.

How Does an Investor Benefit from a Shelf Prospectus?

Investors gain multiple advantages from a shelf prospectus:

• Greater Transparency: A single document offers comprehensive details about the company.
• Consistent Access to Securities: Investors can participate in multiple offerings from a single prospectus.
• Time-Saving: Reduces the need to analyse multiple prospectuses for each security issuance.
• Better Investment Planning: Enables informed decision-making with consistent financial disclosures.

Difference Between Shelf Prospectus and Red Herring Prospectus?

Financial Securities and Shelf Prospectus

A shelf prospectus allows companies to issue various types of financial securities, including:

• Equity Shares: Ownership stakes in a company.
• Debentures: Debt instruments issued by companies.
• Bonds: Fixed-income securities providing periodic interest payments.

This streamlined approach reduces delays and administrative hurdles for issuing these securities over multiple tranches.

What Is an Information Memorandum?

An Information Memorandum is a document containing essential details about a company’s financials, operations, and business strategy. It is a key resource for investors, offering in-depth insights into the company's capital-raising plans.

When a company issues securities under a shelf prospectus, it must file an Information Memorandum before each offering to ensure updated and accurate disclosures.

Procedure to Fill Form PAS-2

Form PAS-2 is required to be filed as per the Companies (Prospectus and Allotment of Securities) Rules, 2014. Here’s how to fill it:

1. Company Details: Enter the name, registered office, and CIN.
2. Security Details: Specify the type and number of securities being offered.
3. Offer Details: Mention the issue price, purpose, and utilisation of funds.
4. Financial Statements: Attach recent audited financial reports.
5. Declaration: Ensure proper authorisation and sign the form.

Procedure to Upload Form PAS-2

Once Form PAS-2 is completed, follow these steps to upload it to the MCA (Ministry of Corporate Affairs) portal:

1. Prepare the Form: Ensure all required fields are filled out correctly and attach the necessary documents.
2. Log in to the MCA Portal: Use company credentials to access the e-filing section.
3. Upload the Form: Select Form PAS-2, attach supporting documents and verify details.
4. Payment of Fees: Pay the prescribed filing fee through the portal.
5. Submit and Confirm: After submission, a confirmation receipt and acknowledgement are generated.

Conclusion

For companies, a shelf prospectus eliminates the repetitive, time-consuming regulatory hurdles that come with multiple capital raises.

Instead of drafting and filing a new prospectus each time, businesses can plan their fundraising strategically, issuing securities when market conditions are favourable. This saves time, reduces administrative costs, and provides the flexibility needed to stay competitive.

For businesses, this means less paperwork, faster fundraising, and more flexibility to raise funds when needed. For investors, it provides greater transparency and clarity, helping them make better financial decisions.

By using a shelf prospectus wisely, companies can focus on growth, and investors can confidently explore opportunities—making it a win-win for everyone in the financial market.

Frequently Asked Questions

Budget 2024 Latest Update on Corporate Tax Rate

Finance Minister Nirmala Sitharaman has proposed a reduction in the corporate tax rate for foreign companies, bringing it down from 40% to 35% in the 2024 budget.

Subdivisions of Direct Taxes

Direct taxes in India are categorized as follows:

1. Personal Income Tax
   
   • Paid by individual taxpayers based on their income.
   • Taxed according to predefined slabs at different rates.
2. Corporate Income Tax (CIT)
   
   • Paid by domestic and foreign companies on their income earned in India.
   • The CIT is levied at rates specified by the Income Tax Act, subject to annual revisions in the Union Budget.

What is Pvt. Ltd. Tax Rate?

The Pvt. Ltd. tax rate refers to the corporate income tax rate applicable to private limited companies in India. Under the Income Tax Act, 1961, domestic companies are generally taxed at 30% on their total taxable income, with variations based on turnover and certain conditions.

For companies with a turnover of less than ₹400 crore, the tax rates are as follows:

• Turnover up to ₹1 crore: Taxed at 25%.
• Turnover between ₹1 crore and ₹10 crore: Taxed at 25% on profits exceeding ₹25 lakh, plus an additional ₹25 lakh.
• Turnover above ₹10 crore: Taxed at 30%.

A 4% Health and Education Cess is levied on the total tax payable.

Companies may also opt for a reduced tax rate of 22% under Section 115BAA, provided they forgo certain exemptions and deductions. This option also includes the surcharge and 4% cess.

Additionally, new manufacturing companies incorporated after October 1, 2019, can avail a 15% tax rate (plus surcharge and cess) under Section 115BAB, subject to specific conditions.

Corporate Income Tax Rate for AY 2022-23

The Corporate Income Tax Rate for the Assessment Year 2022-23 varies based on the company's turnover and the applicability of surcharge and cess. Here's a table summarising the effective tax rates:

For Companies with Turnover Above ₹400 Crore

For Companies with Turnover Below ₹400 Crore

Key Budget 2022 Updates

1. No Changes in Tax Rates: The corporate tax structure remained unchanged.

2. Updated Surcharge Cap for Cooperatives: Surcharge capped at 7% for cooperatives with income between ₹1 crore and ₹10 crore.

3. Set-Off for Losses in Case of Start-ups: Extended incorporation date for start-ups to claim tax holiday under Section 80-IAC to 31 March 2023.

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Income Tax Rate for Domestic Manufacturing Companies for AY 2022-23

New manufacturing companies incorporated in India on or after October 1, 2019, and commencing production before March 31, 2023, can avail a concessional tax rate for private limited companies of 15% under Section 115BAB. However, this is subject to certain conditions, such as:

• The company should be engaged in the business of manufacture or production of any article or thing
• It should not be formed by splitting up or reconstruction of an existing business
• It should not use any plant or machinery previously used in India (with certain exceptions)
• The option to avail Section 115BAB must be exercised in the first year of operation

The applicable tax rates for domestic manufacturing companies for the assessment year 2022–23 are outlined below:

Education Cess for Companies

Private limited companies are required to pay an education cess at the rate of 4% on the total income tax, including the applicable surcharge. Below is a detailed explanation of the corporate income tax rates for FY 2021–22 or AY 2022–23:

For companies with a turnover of up to ₹400 crore:

• Income up to ₹1 crore is taxed at 25%.
• Income exceeding ₹1 crore but up to ₹10 crore is taxed at 25% plus ₹25,00,000. A 7% surcharge applies.
• Income above ₹10 crore is taxed at 25% plus ₹2,50,00,000, with a 12% surcharge.

For companies with a turnover exceeding ₹400 crore:

• Income up to ₹1 crore is taxed at 30%.
• Income exceeding ₹1 crore but up to ₹10 crore is taxed at 30% plus ₹3,00,000. A 7% surcharge applies.
• Income above ₹10 crore is taxed at 30% plus ₹3,00,00,000, with a 12% surcharge.

The education cess of 4% is uniformly applicable to the total tax payable, including any surcharge, regardless of turnover.

Ready to incorporate your company? Start your journey with Private Limited Company Registration through Razorpay Rize today!

Income Tax Rate for Foreign Company

Foreign companies, i.e., those incorporated outside India but earning income from Indian sources, are taxed at a basic rate of 40% (plus applicable surcharge and cess). The surcharge is levied at 2% on income between ₹1 crore to ₹10 crores and 5% on income exceeding ₹10 crores.

It is important to note that foreign companies can avail beneficial provisions under the Double Taxation Avoidance Agreement (DTAA) between India and their country of residence to minimize their tax liability.

Minimum Alternate Tax for Company

The Minimum Alternate Tax (MAT) provisions apply to companies whose tax payable under the normal provisions of the Income Tax Act is less than 15% of their book profits. In such cases, MAT is levied at 15% (plus applicable surcharge and cess) of the book profits.

However, MAT is not applicable to companies opting for the concessional tax regimes under Section 115BAA and Section 115BAB. Further, the credit for MAT paid is allowed to be carried forward for 15 years to be set off against future tax liabilities.

H2 - How to Calculate Total Income for a Company?

To arrive at the taxable income for a private limited company, the following steps are involved:

The Corporate Income Tax Rate is then applied to this taxable income to determine the tax liability of the private limited company.

Returns Applicable for Domestic Company for AY 2022-23

Private limited companies are required to file their income tax returns annually. For the assessment year 2022-23, the following returns are applicable:

1. ITR-6: This return is applicable for companies other than those claiming exemption under Section 11 (income from property held for charitable or religious purposes).

2. ITR-7: This return is applicable for companies claiming exemption under Section 11.

The due date for filing the return is 31st October of the assessment year. However, for companies required to furnish a report in Form No. 3CEB under Section 92E (relating to international transactions), the due date is 30th November of the assessment year. Companies must also ensure timely compliance with advance tax payments, TDS/TCS obligations, and tax audit requirements (if applicable) to avoid penal consequences.

Domestic Company Tax Slab for AY 2024-25

For the Assessment Year (AY) 2024–25, the income tax rates for domestic companies depend on their turnover or gross receipts during the financial year (FY) 2020–21, as well as the tax provisions they choose to apply under specific sections of the Income Tax Act. The applicable rates are as follows:

• If the total turnover or gross receipts during FY 2020–21 do not exceed ₹400 crores:
  
  • Tax rate: 25%
• If the company opts for Section 115BA:
  
  • Tax rate: 25%
• If the company opts for Section 115BAA:
  
  • Tax rate: 22%
• If the company opts for Section 115BAB:
  
  • Tax rate: 15%
• For any other domestic company:
  
  • Tax rate: 30%

These rates are exclusive of surcharge and cess, which will be applied additionally based on the applicable income slabs.

Frequently Asked Questions