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Limited Liability Partnership (LLP) Registration

An alternative corporate business form that gives the benefits of limited liability of a company and the flexibility of a partnership is known as a limited liability Partnership (LLP).

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What is a Limited Liability Partnership (LLP)?

An alternative corporate business form that gives the benefits of limited liability of a company and the flexibility of a partnership is known as limited liability Partnership (LLP). The LLP can continue its existence irrespective of changes in the partners; it is capable of entering into a contract and holding property in its own name. Mutual rights and duties of the partners within an LLP are governed by an agreement between the partners or between the partners and the LLP as the case may be.

LLP contains elements of both ‘a corporate structure’ as well as ‘a partnership firm structure’ LLP is called a hybrid between a company and a partnership.

It is a form of business which is came into existence through LLP act 2008. It is a form of business having separate legal entity, is liable to the full extent of its assets but the liability of the partners is limited to their agreed contribution in the LLP.

Features of LIMITED LIABILITY PARTNERSHIP

1. BODY CORPORATE

An LLP is registered under the Limited Liability Act 2008, It is defined as a body corporate in Section 3 of the said Act.

2. SEPERATE LEGAL ENTITY

An LLP has a distinct legal activity upon its incorporation. The identity of its partners is absolutely separate from that of its own. A limited Liability Partnership can sue and be sued in its own name. It is a separate legal body, just like a corporation. In addition, it is entirely responsible for its properties. In addition, the partners' responsibility is limited to their LLP contribution. Therefore, not the individual partner lenders are the creditors of the limited liability company.

3. PARTNERSHIP DEED

An LLP contains the features of both a partnership and a Limited Company. It is born from an agreement between two people to perform a business activity for the motive of sharing profits. The partnership deed pertaining to an LLP is the charter of a Limited Liability Partnership.It is the document that governs the rights and liability of the partners.

4. MUTUAL AGENCY

One of the unique features of an LLP is that independent actions of one partner does not affect the liability of any other partner of the firm. TAll the partners are considered to be agents of an LLP and their actions are not binding on each other vide their relationship as partners to the firm.

5. PERPETUAL SUCCESSION

A Limited Liability Partnership follows the principle of perpetual existence. This implies that the business and the LLP continue even after cessation or death of any or all of the partners. The contracts and property held in its remain continue to stay the same way even after cessation of its partners.

6. ARTIFICIAL LEGAL PERSON

Just like a limited company, a Limited Liability Partnership also enjoys the status of an artificial legal person. It is created in accordance with the provisions of the law and hence enjoys some of the rights equivalent to that of an individual. Is is an invisible and intangible and immortal entity but it is absolutely not fictitious as its EXISTS!

7. NUMBER OF PARTNERS

LLP should have a minimum of 2 partners out of which atleasst 1 of the Designated Partners should be resident of India. The is no upper limited prescribed for the number of partners.

8. MANAGEMENT

The Partners of a Limited Liability Partnership can manage its business. However, only the Designated Parters are responsible for its legal and regulatory compliance.

Advantages of Limited Liability Partnership (LLP)

Limited liability partnership form of business is easy and simple way to get into the corporate world and it is easy way for a good start-up.  As compare to Sole Proprietorship or partnership, it is a better form of entity for start-up as in this form of business liability of partners is limited.

Some of the benefits of LLP are as follows:

  • The liability of the partners of a Limited Liability Partnership (LLP) is limited to their capital.
  • It is quite easy to incorporate and operate a Limited Liability Partnership (LLP).
  • There is NO MINIMUM CAPITAL requirement specified for formation of a Limited Liability Partnership (LLP). i.e You can even incorporate an LLP with as low as Re. 1.
  • There is no maximum limited prescribed for the number of members of a Limited Liability Partnership (LLP).
  • Compliance regime of a Limited Liability Partnership (LLP) is much simpler as compared to other corporate forms of entities.
  • A Limited Liability Partnership (LLP)does not have to pay dividend distribution tax and thus ends up saving some tax as a business entity.

Documents required for Incoration of Limited Liability Partnership (LLP)?

1. ID proof of proposed Directors and members:

a. PAN card (Mandatory)

b. Aadhar card (Mandatory)

c. Passport or Voter’s ID or Driving License

2. Address proof of proposed members and directors (any one):

a. Telephone bill

b. Mobile Bill

c. Bank statement

d. Electricity bill

3. Address proof for the principal place of business of the proposed company (any one)

a. Utility bill like telephone bill, electricity bill, gas bill, water bill

b. Rent agreement with rent slip

c. Proof of ownership

Process of Incorporation of LLP

STEP 1: NAME APPLICATION

The first step towards incorporation of an LLP is to apply for the desired name through the RUN Form on the MCA portal. MCA provides us with the option of stating two proposed names which are subject to scrutiny and approval. In case any of the two options are not approved then a chance to resubmit two other names is provided.

STEP 2: OBTAIN DIGITAL SIGNATURE CERTIFICATES (DSC)

Digital Signature Certificates for the proposed partners and designated partners are to be applied for in accordance with the applicable provisions. This step shall be undertaken simultaneously with the name application in order to safe some time. Every application for incorporation of an LLP is a completely online process and can be signed by the authorised person electronically using issues DSC only.

STEP 3: LIMITED LIABILITY PARTNERSHIP DEED

Post filing and approval of the name application, the partnership deed pertaining to the proposed LLP should be meticulously drafted and printed on the stamp paper of the prescribed amount. This deed should be signed by all the partners and attested by a notary public. LLP deed generally includes the provisions related to the following points:

a. Details of the Partners: Name, Address and occupation of the partners;

b. Details of the Firm: Name of the firm, Address of the Firms, business activity to be undertaken by the firm

c. Capital: Details of Capital infused or contributed by the partners

d. Date of Commencement of the business

e. Profit-Sharing: A partnership deed should clearly describe the ratios in which the profits and loses of the firm shall be distributed.

f. Interest Clause: The deed should make provisions for interest on loans given, capital contributed and drawings made by the partners of the firm.

g. Remuneration Clause: The deed should also define the salaries, remunerations, commissions or any other form(s) of payments to be made to the partners.

h. Rights & Duties of Partners: A well-drafted partnership deed should contain provisions clearly defining the rights & duties of all the partners of the firm, whether active or inactive.

i. Changes in Partnership:  The processes to be followed in case of changes in the structure of partnership or business of the partnership shall be provisioned in the deed. The deed should also define the process to be undertaken in case of retirement, cessation, death or induction of any partner in the firm.

j. Any other clauses: The deed may contain any other provisions that the partners have mutually agreed on pertaining to any aspect of the LLP deed as long as it is within the ambit of the law

STEP 4: FILING FOR INCORPORATION

One the name of the proposed LLP is approved, a name approval letter is issued by the MCA. Post receiving the name approval letter, the forms for the incorporation of the proposed LLP shall be prepared and filed in accordance with the provisions of the Limited Liability Partnership Agreement. The form should be accurately prepared and filed with the applicable fees.

STEP 5: FILING OF LLP AGREEMENT

On approval of the application for incorporation of the LLP, a signed and notarized copy of the LLP agreement shall be filed with the respective ROC in the prescribed form online. The process of incorporation is concluded with the receipt of approval of the filed LLP Agreement.

FAQs

 

Q. What is an LLP?

It is a form of business which is came into existence through the LLP act 2008. It is a form of business having a separate legal entity, is liable to the full extent of its assets but the liability of the partners is limited to their agreed contribution in the LLP.

An alternative corporate business form that gives the benefits of limited liability of a company and the flexibility of a partnership is known as limited liability Partnership (LLP). The LLP can continue its existence irrespective of changes in the partners; it is capable of entering into a contract and holding property in its own name. Mutual rights and duties of the partners within an LLP are governed by an agreement between the partners or between the partners and the LLP as the case may be.

 

Q. Pre-requisite for incorporating an LLP?

A. -There should be a minimum of 2 designated partners.

-There should be a place of business

- There should be a contribution to the business through its proposed partners

 

Q. Benefits of incorporating an LLP?

-It is a hybrid form of business, having features of a company and partnership both.

-There is less compliance in compare to a company

-It can be incorporated with small capital

 

Q. Is there any provision of conversion of existing LLP?

As it is a hybrid form of business, so there is the provision of conversion of LLP.

An existing LLP can be converted into a company, an existing partnership (registered under partnership act) can convert into LLP, and an existing company can convert into LLP. All these conversions can take place as per the rule and regulation stated under the LLP act 2008.

 

Q. What is the annual compliance of an LLP?

An incorporated LLP needs to file annual returns under form 11 and needs to file a statement of accounts & solvency under form 8.

TIPS FOR A SUCCESFUL PARTNERSHIP BUSINESS

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