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The entrepreneurs of India are increasingly opting Limited Liability Partnership (LLP) structure No. as their desired organizational structure. The LLP structure unites critical features from both partnership firms and companies into one entity. Details in its designation show that an LLP represents a partnership structure formed by at least two participants operating under an LLP agreement. Partners of LLPs establish limited participant liability while the entity benefits from perpetual organizational succession like companies.
In the year 2008 India introduced the Limited Liability Partnership (LLP) framework. The system of managing LLPs in India is governed by Limited Liability Partnership Act of 2008. Minimum two partners must be formed in order to incorporate into an LLP. Despite meeting the LLP requirement, an LLP can maintain its registration without restrictions on the number of partners it accepts.
Each LLP must designate at least two partners who remain natural persons with one of their members being a resident of India. The designated partners receive their rights and duties through the standard provisions of their LLP agreement. Under the LLP Act 2008 along with the provisions mentioned in the LLP agreement designated partners must ensure full compliance.
The legal structure of LLP functions independently in the same way as corporate entities.
A new LLP requires at least two partners who will establish this business structure together.
Irrespective of how many partners exist there are no restrictions to the maximum numbers allowed.
All limited liability partnerships require at least two partners assigned to handle such duties.
One of the specified partners should be an Indian resident.
Each LLP partner has restricted liability that equals their allocated contribution amount.
LLP formation expenses remain at minimum levels.
Less compliance and regulations.
No requirement of minimum capital contribution.
Separate legal entity : A LLP has its own legal personality that is similar to that of a company. The structure of the organization of the LLP is independent of the member contributors. The LLP has the right to be sued and subjected to legal action through its own name of business. Contracts signed by the LLP with the name of the company assist in creating trust with the stakeholders and motivating clients and suppliers to have faith in the company to engage in business with them.
Limited liability of the partners : Some of the members of LLP they bear the financial responsibility not as investors but solely as a result of their investment. The liability of each partner is limited to the amount of capital that he/she donated at the time of forming the partnership. The amount of contribution made by the partners is the utmost liability to them since they are not subjected to the personal liabilities of the business. This leads to the assets of the establishment settling the business liabilities during the period of closure of an LLP where partners are not exposed to unlimited liability.
Low cost and less compliance : An LLP's formation expenses remain lower than those of establishing either a public limited company or private limited company. There are few requirements an LLP has to adhere to. Two necessary annual documents compose the LLP's filings: Annual Return together with Statement of Accounts and Solvency.
No requirement of minimum capital contribution : It does not have a minimum required capital in the formation of an LLP. Any form of company may incorporate without any minimum paid up capital. Any amount of capital contributed by the partners will make the LLP be formed.
Winding up and dissolution of LLP : LLPs require two or more partners in order to present their operations. It will automatically dissolve the company in case the number of partners decreases to less than two within six consecutive months.
Step 1: Obtain Digital Signature Certificate (DSC)
Before starting the registration procedure it's essential to obtain Digital Signature Certificates from designated partners involved in the proposed Limited Liability Partnership. Digital signatures become essential because LLP documentation must be submitted through online platforms which need secure electronic signatures. Certificate holders must acquire their digital signature certificates by receiving them from government approved certifying agencies. A certified agency list follows below. Different government-approved certifying agencies determine the prices for obtaining digital signature certificates. You need to get DSC in class 3 category as part of your application process.
Step 2: Designated partner identification number (DPIN)
Applications have to be submitted to DPIN the partners LLP propose to designate. To receive the DPIN allocation you should apply using Form DIR-3. Each application requires attaching a scanned version of your Aadhar Card and PAN Card documents to the Form. A Company Secretary or Cost Accountant or Chartered Accountant working full time must sign this form.
Step 3: Name Approval
RUN-LLP functions as an application system to obtain reservations of proposed LLP names and the Central Registration Centre controls its processing. Before writing an LLP name on the form you must check Ministry of Corporate Affairs (MCA) portal's free name search tool.
A search in the system will display names from existing companies/LLPs which match the search conditions supplied by users. The search results show counterparts that will assist you in preventing name duplication. A name for LLP approval will be given by the Central Government to be used for LLP if it seems fitting to them but it is neither similar to the earlier name or the name of association or company or brand name or the LLP name.
The form allows one opportunity to resubmit within 15 days for correcting identified defects. The LLP can submit two proposed names while making an application. You need to submit your LLP incorporation request.
Step 4: Incorporation of LLP
FiLLiP stands as the incorporation document and participants must submit it to the Registrar who controls the area where the LLP's registered office stands. An integrated form serves as the incorporation method.
You need to pay fees per the amount listed in Annexure 'A'.
Using this form a person not possessing DPIN or Director Identification Number (DIN) can desire the allotment of DPIN in case of a desire to become a designated partner.
Two individuals comprise the only authorized parties who can submit such applications for name allocation.
Users can submit their name reservation requests through the online portal FiLLiP.
Approval of name of the application is provided and name which is going to be reserved after acceptance is published as proposed name of LLP.
Step 5: LLP entities to be filed form 3 i.e. Limited Liability Partnership agreement
An LLP agreement sets boundaries for both partnership relations among members and between the partnership and its members.
The MCA portal requires all LLP agreement documents to be submitted using Form 3 in electronic format.
Exceptions in the case of LLP agreement filings result in notification in a time span of 30 days counting since incorporation.
All LLP Agreements need to appear on Stamp Paper for legal validity. A different stamp duty value exists for Stamp Paper depending on each state.
Documents of Partners
The LLP should also get registered and that requires the PAN Card and any one of the valid ID Proof (PAN Card/ ID Proof) of every partner whose name is mentioned. PAN card takes care of all requirements that ought to be accompanied by a proof of identity.
Partners who want to demonstrate their residence can use any valid identification including voter’s ID, passport and driver’s license and either utility bills less than two months old or an Aadhar card. Accounts and personal information recorded in residence proof documents and PAN identity cards must match exactly.
Partners must submit their photographs that match passport dimensions on a white background surface.
Foxiegn nationals wanting to partner with an Indian Limited Liability Partnership must submit their passport for registration as per guidelines. Foreign nationals and NRI must apply for document notarization or apostilling from their home country's relevant authorities to join an Indian LLP. If needed the Indian embassy in their country may instead sign the necessary documents.
All foreign nationals along with NRIs requiring address verification must present government-issued identity proofs including residence cards or bank statements or driving licenses.
Translations of documents in languages other than English must include original notarization or apostilled certification.
Documents of LLP
The submission requirements for registration accept gas utility bills or electricity bills or telephone bills from any single source. A valid application requires proof of premise address and owner name alongside documents that stay current for 2 months.
Only one designated partner needs to obtain digital signature certification because they will use it to digitally sign all business documents.
|
Form name |
Purpose of the form |
|
FiLLiP |
Form for incorporation of LLP |
|
RUN LLP |
Form for reservation of name of the LLP |
|
Form 3 |
Information about LLP agreement |
|
Form 8 |
|
|
Form 11 |
|
|
Form 24 |
Application to the Registrar of Companies for striking off name of the LLP |
Minimum of two partners.
DSC for all designated partners.
DPIN for all designated partners.
A distinctive name must exist for the LLP structured business and should differentiate itself from current LLP format and trademark usage.
Capital contribution by LLP partners.
LLP Agreement between the partners.
Proof of registered office of the LLP.
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LLPs do not have partners; they have members. The term "partner" is more commonly used in general partnerships, whereas LLPs use the term "member" to refer to individuals involved in the business.
The required documents for incorporating an LLP typically include the LLP agreement, consent of partners, declaration of partners, and address proof of the LLP's registered office.
LLPs provide limited liability protection to partners, whereas in a general partnership, partners are personally liable for the debts and obligations of the business.
A designated partner is a person or entity chosen by a limited liability partnership to be responsible for the compliance of the LLP with all the statutory requirements. They have specific duties and responsibilities outlined in the LLP agreement.
