Limited Liability Partnership (LLP)
Limited Liability Partnership (LLP) is a Body Corporate having the features of a Partnership Firm and a Limited Company. The management of LLP is defined by LLP agreement and partners have the freedom to regulate affairs of the LLP. It is a corporate business medium that provides the benefits of limited liability, where professionalism and inventiveness combine to operate flexibly, organizing their internal structure on a partnership basis.
Any two or more persons, associated in carrying on a profit-oriented lawful business may enter their names in the incorporation document and file the same with the Registrar, to form a Limited Liability Partnership. The LLP has a perpetual succession. The liability of the partners is limited to their agreed contribution in the LLP which may be of tangible or intangible nature or both.
The minimum number of Partners or Designated Partners is 2. The mutual rights and duties of partners in an LLP are governed by an agreement between the partners or between the LLP and the partners subject to the provisions of the LLP Act 2008.
Every LLP shall be required to have at least two individual Designated Partners. At least one of the Designated Partners shall be a resident of India. In case of an LLP where all the partners are corporate bodies or in which one or more partners are individuals and corporate bodies, then at least two individuals who are partners of such LLP or nominees of such corporate bodies shall act as designated partners.
The main advantages of LLP are:
No requirement of audit of accounts until turnover reaches Rs.40 lakhs or Contribution of Rs.25 lakhs.
Less tax as compared to the company.
No requirement of minimum capital contribution.
No restriction as to maximum number of partners.
The registration process is simple.
The Ministry does not allow another person to start another LLP or Company in your LLP's Name.
The formation procedure costs less.
Less statutory compliances as compared to Private Limited Companies.
No exposure to personal assets of the partners except in a fraud case.
Body corporate can be a partner of an LLP.
Less Government intervention.
Easy to dissolve or wind-up.
Steps to be taken to get registration of a Limited Liability Partnership:
Step - 1 Apply for Digital Signature Certificate
Digital Signature Certificate for Partners of a Limited Liabilities Partnership Firm, both Indian and foreigners, are also required to get Digital Signature Certificate - DSC - under the new requirements. Digital Signature Certificate (DSC) is required for all Partners who will require to sign ROC forms or documents. A DSC, like hand written signature, establishes the identity of the sender filing the documents through internet which sender cannot revoke or deny.
Step - 2 Apply for Designated Partner Identification Number (DPIN No.)
Partners for a LLP, both Indian and foreigners, must register and get and identification number under the new requirements. It is called Designated Partner Identification Number (DPIN No.)
Step - 3 Apply for the availability of the name
The next step is to decide the name for the proposed LLP to be incorporated. Anyone intending to incorporate an LLP has to evaluate his proposed name under the prescribed parameters and make an application in eForm 1 of Rule 18(5) of the LLP Act, 2008 for reservation of the desired name.
The name of the LLP shall not be similar or identical with that of a Company or LLP already registered in India. The details to be state in the eform 1 are as follows : 1. Six alternative names for the proposed LLP. 2. Name, addresses and DPIN of Partners 3. Proposed monetary value of partner's contribution. 4. Description of proposed business activity.
Step - 4 Drafting the LLP Agreement:
On receipt of the name approval letter from the ROC the LLP Agreement required to be drafted. Its Contents include: 1.Name of LLP 2.Name of partners/ designated partners 3.Form of Contribution 4.Profit sharing Ratio 5.Rights and Duties of partners 6.Proposed Business 7. Rules governing the LLP
Step - 5 File the documents for LLP Registration:
Once, name is allotted, company registration documents have to be prepared and filed with respective ROC for registration. The following documents and Form filed with ROC:• Form2 – Incorporation documents • Form3– Details of LLP agreement • Form4– Consent of partners • Subscription Sheet • LLP agreement duly stamped • Address proof of the registered Office
All the eForms shall be digitally signed by any designated partner and shall be certified by an Advocate/ CA/CS/CWA in practice engaged in the formation of the LLP.
After the Registrar is satisfied that all formalities are complied with, he issues a Certificate of Incorporation as to the formation of the LLP within a 7 days of filing eForm2 and will issue a Certificate of Incorporation in Form 16, which shall be conclusive evidence as to the formation of the LLP.