Quick answer: An LLP, or limited liability partnership, is a body corporate under the Limited Liability Partnership Act, 2008. It is separate from its partners, survives changes in them and limits each partner’s liability. Every LLP needs at least two designated partners who are individuals, and one must be resident in India for 120 days in the financial year.
- The 120-day residency test replaced the old 182-day test from 1 April 2022.
- FDI into an LLP is allowed under the automatic route only in sectors with 100% automatic FDI and no FDI-linked performance conditions.
- Form 11 (annual return) is due by 30 May and Form 8 (accounts and solvency) by 30 October.
- An LLP’s accounts need an audit only above ₹40 lakh turnover or ₹25 lakh contribution.
How does an LLP work?
Like a company in law, like a partnership inside.
The LLP Act text published by ICAI says the LLP’s obligations are “solely the obligation of the LLP”. A partner is liable for their own wrongful acts, not for other partners’. The partners run the firm through an LLP agreement rather than a board, articles and shareholder meetings.
Designated partners carry the statutory duties. Filings, compliance, penalties. Companies can be partners. Each must then nominate an individual to act as a designated partner.
Filings are lighter than a company’s, with no board meetings, no AGM and an audit only above the thresholds. Late fees bite, though. ₹100 a day.
LLP vs private limited: which suits a foreign owner?
For most foreign groups, the company.
| Point | LLP | Private limited company |
|---|---|---|
| Residency rule | 1 designated partner, 120 days | 1 director, 182 days |
| FDI | Only 100% automatic sectors with no performance conditions | Automatic or government route, by sector |
| Equity investors | No shares, so no share capital rounds | Shares, convertibles and ESOPs |
| Audit | Above ₹40 lakh turnover or ₹25 lakh contribution | Every year, whatever the size |
| Board and AGM | Not required | Required |
Two points tip the balance. Investors and parent companies expect shares, and an LLP cannot issue them. And the FDI route is narrow, so any sector with a cap or condition rules the LLP out. Our wholly owned subsidiary entry covers the usual alternative.
That said, an LLP can suit a professional services firm owned by individuals who want light compliance.
Does an EOR beat an LLP for hiring?
For hiring alone, usually yes.
An LLP still needs a resident designated partner, an LLP agreement, a bank account, FEMA reporting on the capital and a full payroll set-up before anyone is employed. An EOR employs your team on its own Indian entity, so none of that is yours. Suppose you want two consultants in Pune for a 12-month pilot. An LLP takes weeks to form and leaves you with an entity to wind up when the pilot ends, while an EOR can onboard them in days.
Pick an LLP when partners in India want to own a services business together, with FDI only from eligible sectors. Our guide on starting a startup in India compares the founder options.
How does Remunance help you decide between an LLP and an EOR?
Remunance employs teams for 150+ international clients from 22 countries without any entity on the client’s side. Our employer of record services cover payroll, PF, ESIC, Professional Tax and exits. If an Indian entity becomes the right answer, we can help form it and move your staff across. Talk to an India entity and hiring adviser before you register a partnership.
What else do people ask about LLPs?
Can a foreign national be a partner in an Indian LLP?
Yes. Sector FDI rules still apply, and at least one designated partner must be resident in India for 120 days in the financial year.
Is an LLP better than a private limited company?
Sometimes. For individual partners who want light compliance an LLP often wins, but for foreign investment, equity funding or ESOPs a private limited company usually works better.
Does an LLP need an audit in India?
Only if turnover exceeds ₹40 lakh or partners’ contribution exceeds ₹25 lakh.