As one of the fastest-growing countries, India has always been an attraction for foreigners and NRIs for investment purposes. On the other hand, the government has also valued the investment made in India, especially with the NRIs. Due to the advantages and immense returns on investments, India has become a favorite destination for NRIs in India. In recent years, it has been observed that limited liability partnership has emerged as the most convenient business structure amongst the NRIs. In addition, increased LLP registration in India by an NRI has raised the investments in India by non-resident Indians.
Earlier, NRIs and foreign nationals looking to begin a business in India did it through the automatic route of 100% foreign direct investment (FDI) in a private limited company. However, the compliance requirements of the company formation were a deciding factor. Eventually, the Indian government permitted a 100% FDI in limited liability partnership (LLP) via the automatic route. It made it effortless for NRIs and foreign nationals to invest in Indian businesses.
LLPs were initiated in India via the LLP act, 2008. LLPs soon became well-liked among businesses instead of private limited companies with a lower cost of incorporation and minor compliance requirements.
Main features of Indian LLP
Some of the significant features of the India LLP are as follows:
- Require a minimum of two designated partners
- Investment friendly
- Body corporate and benefit of limited liability
- Newly accepted business structure
- Easy restructuring
- No limit of maximum partners
- Suitable for startups and growing service sector companies
- Cannot access public funds
How can foreign businesses find their way to India?
There are mainly three types of entry strategies for foreign businesses in India, which are as follows:
- Incorporation of the Company
The incorporation of a private limited company has been the most preferable and convenient option for foreign nationals and NRI’s to enter India; since 100% FDI under the automatic route is allowed.
- Opening of branch office
In many other countries, foreign investors can open a branch office and obtain access to the country’s markets. However, most NRIs and foreign nationals didn’t prefer this route in India. The reasons were plenty- difficulty in getting approval from the RBI, an excellent financial record etc.
- Registration of LLP
Before November 2015, an NRI or a foreign national needed to seek permission from the Indian government to invest in an LLP in India. Hence, the procedure was long and costly. This was another basis behind the preference of a private limited company for FDIs. However, after relaxation in FDI regulations on 10th November 2015, LLP registration can be done easily by NRIs and foreign nationals.
What significant relaxations were provided in FDI norms regarding FDI in LLP?
After changes in FDI regulations on 10th November 2015, 100% FDI in LLP is allowed for businesses operating in specific sectors through the automatic route, and there are no FDI-linked performance conditions. In addition, LLPs will also be permitted to make downstream investments in another company or LLP in specified sectors under the automatic route. Again, there are no FDI-linked performance conditions. Therefore, FDI in LLP is now allowed, and NRIs or foreign nationals can start or invest in an LLP.
LLP registration procedure for NRIs and foreign nationals
A minimum of two people are required to register an LLP in India. At least one of the partners of the LLP is recommended to be both an Indian citizen and an Indian resident- similar to the requirement for registration of the Company in India. Further, the procedure for LLP registration involves five significant steps, which are discussed below:
- Obtain a digital signature certificate
The initial step is to obtain a “digital signature certificate” for proposed partners of LLP. For getting the same, NRI’s or foreign nationals are required to submit a DSC application along with documents such as a notarized copy of passport and address proof.
- Apply for a designated partner identification number
The next step is to obtain DPIN, i.e. “designated partner identification number,” by filing a DIR-3 form that shall have a photo of the applicant and in case of foreign nationals’ passport is mandatorily required as Identity proof and any other documents like voter ID card, passport address proof. (Else DPIN can also be applied with FiLLiP form).
- Seek approval for the name of the LLP
You must appeal for reserving the name of the LLP. Application for the name is made in LLP-RUN form to the ministry of corporate affairs (MCA). Also, you can appeal for up to four names as per your liking(two names each attempt). The suggested names must follow the instructions as per the LLP act, 2008. Further, you must ensure that the name is distinctive and not similar to any other LLP name by examining it on the MCA website.
- Incorporate the LLP
Once the name is approved, the application shall be submitted for incorporation of LLP within three months. You will have to present the required documents, i.e. Subscriber’s sheet, the partner’s consent, NOC and evidence of registered office, and details of interest of designated partners in other entities in form fillip. Once the application is accepted, the MCA provides a certificate of incorporation and can commence business.
- File the LLP agreement
On incorporation of the LLP, the partners must sign the LLP agreement within 30 days in form 3 on the MCA portal. Failure to file an LLP agreement on time could result in a heavy penalty that accrues daily. Hence, it is essential to quickly file the LLP agreement and complete the LLP incorporation process.
Government fees and other expenses to add a foreign national partner in LLP
Below are approximate government fees and other expenses required for adding a foreign partner in LLP:
|S.no.||Particulars||Amount ( in rupees)|
|1.||DPIN government fees||500|
|2.||Digital signature (DSC) for foreign national||1000|
The procedure for LLP registration in India for NRIs and foreign nationals is simple and similar to that for Indian citizens. However, there are specific compliance requirements that even NRIs and foreign nationals need to meet post-incorporation of the LLP. Therefore, incorporating an LLP is cheaper and convenient for starting a business due to lesser costs and compliances. Now, when the government has provided relaxation in regulations for investment in LLP by foreign nationals or NRI, this option seems to be perfect in all respects.
We assist our clients with registration/ incorporation of an LLP, annual compliances of LLPs , setting up their business in India, and compliances related to company incorporation, ROC compliance, Company winding up etc. If you have any questions or would like to know more about the LLP registration for NRI and foreign nationals, kindly contact us.