Setting Up a Wholly Owned Limited Liability Partnership of a Foreign Company in India

Establishing a wholly owned Limited Liability Partnership (LLP) in India as a foreign subsidiary requires meticulous planning and adherence to specific regulations. This guide outlines the steps and documents needed to set up such an LLP, the associated costs, and the post-incorporation compliances required.

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Documents Required for Setting Up a Foreign Subsidiary LLP

From The Parent Company

Certificate of Incorporation

Board Resolutions authorising use of Name

Board resolution approving the incorporation of the subsidiary

Board resolution appointing authorised signatory

From The Parent Company

Identity Proof - Passport/Driving Licence

Address Proof - Bank Statement/ Utility Bills

Consent Letter

Photographs

Documents have to be notarised and apostilled by either Indian Embassy/ Ministry of home affairs from state in which Parent/ Foreign Designated Partner is located after translation

Setting Up a Wholly Owned Limited Liability Partnership of a Foreign Company in India

Select Designated Partners:

An LLP must have at least two designated partners, with at least one being a resident of India Maximum three Designated Partners allowed.

for using this integrated form for filing application of allotment of DIN while incorporating a company.

Obtain Digital Signature Certificate (DSC):

All designated partners must obtain a DSC for online document filing.

Name Reservation

File Form RUN-LLP (Reserve Unique Name - Limited Liability Partnership) with the Ministry of Corporate Affairs (MCA) to reserve the LLP name, ensuring it is unique and complies with naming guidelines.

Preparation of Incorporation Documents:

Incorporation Form: Prepare Form FiLLiP (Form for Incorporation of Limited Liability Partnership), detailing the partners, designated partners, and the LLP's registered office. LLP Agreement: Draft an LLP Agreement outlining the mutual rights and duties of the partners, which must be signed and notarized.

Filing for Incorporation:

Submit Form FiLLiP along with required documents, including consent of partners, proof of registered office address, subscription sheets signed by partners, and identity and address proof of partners.

Obtain Certificate of Incorporation:

The Registrar of Companies (ROC) reviews the documents and issues the Certificate of Incorporation (COI) upon satisfaction.>

File LLP Agreement:

Within 30 days of incorporation, file the LLP Agreement with the ROC using Form 3.

Open a Bank Account:

Open a bank account in the LLP's name for financial transactions.

Costs and Fees for Setting Up a Foreign Subsidiary LLP

The total cost of establishing a foreign subsidiary LLP in India includes various expenses such as registration fees, legal fees, government charges, and professional fees. The exact cost varies based on factors like business structure, capital investment, and regulatory compliance. The government fees for an LLP with an initial capital of INR 1 Lakh are as follows (excluding professional fees):

Particulars Cost (INR) Cost (USD)
Name Application (Fee for RUN LLP) 200 $2.40
Incorporation (FiLLiP form) 631 $7.57
Stamp Duty on LLP Agreement 5000 $59.96
LLP Form 3 50 $0.60
Total 5881 $70.53
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FDI Compliances and Process

Initial Investment process

Foreign Direct Investment - Limited Liability Partnership form-

  • When a Foreign Body Corporate/ Foreign Residents Invest in any Indian LLP. The Indian LLP has to File the Prescribed FDI-LLP Form with RBI on behalf of the Indian Company receiving Investment.
  • Such form is filed where such issue reckoned as Foreign Direct Investment (FDI).

Time Limit: - Not later than thirty days from the date of receipt of initial capital from partners.

Documents for Form FDI-LLP 1

Post-Incorporation Compliances

After incorporation, the subsidiary LLP must adhere to several compliances:

  • FLA Filings: File Foreign Liability and Assets Returns annually with the RBI by 15th July each year.
  • Transfer Pricing Compliances: File Form 3CEB with the Income Tax Department along with annual income tax returns, reporting the inflow and outflow of funds between the parent company and the LLP.
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Exit from FDI LLP

LLP-2 filing is done at the time of disinvestment of Capital contribution or transfer of ownership in an LLP from a Non-Resident to Resident or Vice versa. The filing should be done within 60 days from the date of receipt of the amount of consideration.

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Frequently Asked Questions

An FDI in LLP means a foreign direct investment made in an entity through equity instruments by a person or company outside India. As per the Foreign Direct Investment policy of India, a Foreign Direct Investment (FDI) is allowed in limited liability partnership in India, subject to certain conditions. FDI is allowed under the automatic route. This means that no prior government approvals are required for the same.

Here are some of the major benefits of FDI in LLPs:

  • Limited liability protection
  • Flexibility in business management
  • Access to new markets
  • Improved resource pooling
  • Collaboration with foreign technical partners

In the case of an FDI in LLP, the profit distributed to the partners will be tax-free. However, the dividend distributed by the company will be taxable in the hands of shareholders.

You can rely on the chartered accountants at BC Shetty to help you make foreign direct investments in LLPs. They will help you seek the required approvals and also allow you to make well-informed business decisions.

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