Stamp Duty for LLP Agreement: What You Need to Know

If you and your partners have decided to form a Limited Liability Partnership (LLP), you will need to draft and file an LLP agreement. This agreement outlines the rights and responsibilities of each partner, as well as the terms and conditions of the partnership. However, before you can legally register your LLP, you need to pay stamp duty on your LLP agreement.

What is stamp duty?

Stamp duty is a tax that must be paid on certain legal documents, including contracts, agreements, and deeds. The amount of stamp duty you need to pay depends on the value of the document, as well as the state in which the document is being executed.

In the case of an LLP agreement, stamp duty is levied under the Indian Stamp Act, 1899. The rate of stamp duty varies from state to state, and can range from a fixed amount to a percentage of the total value of the LLP agreement.

How is stamp duty calculated for LLP agreements?

The amount of stamp duty you need to pay for your LLP agreement is calculated based on the capital contribution made by each partner. In most states, the stamp duty rate is 0.005% of the total capital contribution made by all partners, subject to a maximum cap.

For example, if three partners contribute Rs. 5 lakhs each, the total capital contribution would be Rs. 15 lakhs. The stamp duty payable on the LLP agreement would be 0.005% of Rs. 15 lakhs, which comes to Rs. 750. However, the stamp duty cap in some states is Rs. 1 lakh, which means you would only need to pay Rs. 1 lakh in stamp duty, even if the calculated amount is higher.

How to pay stamp duty and file your LLP agreement

To pay stamp duty on your LLP agreement, you will need to purchase adhesive stamps from an authorized vendor. The number of stamps required will depend on the amount of stamp duty payable, as well as the value of the LLP agreement.

Once you have affixed the adhesive stamps to your LLP agreement, it needs to be signed by all partners and witnessed by two persons. The LLP agreement must then be filed with the Registrar of Companies (ROC) within 30 days of its execution, along with the necessary documents and fees.

Conclusion

Stamp duty is an important tax that must be paid when creating an LLP agreement. It is essential to calculate and pay the correct amount of stamp duty to avoid any legal complications in the future. By understanding the stamp duty requirements for LLP agreements, you can ensure that your LLP is registered in compliance with all legal regulations.