Form LLP (I): reporting foreign investment in an LLP

When can an LLP take FDI?

Foreign investment in an LLP is permitted under the automatic route only in sectors where 100% FDI is allowed under the automatic route and there are no FDI-linked performance conditions. LLPs cannot take FDI in sectors with caps, approval route or conditions, such as certain financial services or real estate activities.

The consideration must come through banking channels or from NRE/FCNR accounts. Contributions are valued at or above fair value worked out by a chartered accountant, cost accountant or approved valuer as per the FEMA rules.

Form LLP (I) and Form LLP (II)

Form LLP (I) reports inflows, that is, capital contribution by a non-resident or acquisition of a profit share from a resident. It is due within 30 days of receipt of the amount.

Form LLP (II) reports disinvestment or transfer of a non-resident's capital contribution or profit share to a resident, and is generally due within 60 days of receipt of the funds. Both forms are filed in the Single Master Form on FIRMS.

Documents needed

The MCA side must also be updated, and the dates in all filings should line up. Admission of a foreign partner is reported in Form 4 and the change in agreement in Form 3, each within 30 days.

• FIRC or bank certificate for the inward remittance
• KYC of the foreign partner from the AD bank
• Valuation certificate for the contribution or profit share
• Supplementary LLP agreement admitting the foreign partner
• Partners' resolution approving the contribution
• Declaration on sector eligibility and compliance with FEMA

Late filing and LSF

Late reporting can be regularised by paying a Late Submission Fee (LSF) under RBI's A.P. (DIR Series) Circular No. 16 of 30 September 2022. For transaction (flow) returns the LSF is ₹7,500 plus 0.025% of the amount involved multiplied by the years of delay, capped at the amount involved. The LSF route is available only up to three years from the due date; beyond that the matter goes to compounding. Form LLP (I) and LLP (II) are both flow returns, so the amount-based component applies to each delayed return.

Common mistakes

Common errors include taking FDI in an ineligible sector, accepting contribution in cash or through a non-banking channel, valuations that do not follow the prescribed method, and forgetting the Entity Master registration on FIRMS. Mismatches between the LLP agreement, Form 4 and the LLP (I) filing invite queries. LLPs with FDI must also file the FLA return every year by 15 July.

Converting an LLP with FDI into a company

An LLP with FDI can convert into a company, and a company with FDI can convert into an LLP, only if the sector meets the LLP eligibility conditions and, where relevant, government approval is obtained. After conversion the reporting moves to the company forms, such as FC-GPR for fresh issues. Plan such conversions with both the MCA and FEMA steps in mind, as they run on separate timelines.

Step by step

1. 1Confirm sector eligibility

   Check that the LLP's activity allows 100% FDI under the automatic route without conditions.

2. 2Receive contribution

   Get funds through banking channels and obtain FIRC and KYC.

3. 3Complete MCA filings

   File Form 4 and Form 3 for the new partner and amended agreement.

4. 4Register on FIRMS

   Create Entity and Business Users if not done.

5. 5File LLP (I)

   Submit the Single Master Form with documents within 30 days.

6. 6Track approval

   Respond to AD bank queries and keep the acknowledgement.