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Limited Liability Partnership (LLP) has over the recent past turned out to be the most preferred business entity by the emerging players in India. Particularly, an LLP is built with some characteristics of a partnership firm as well as a limited company. Alright, as the name hints an LLP is a partnership firm in which at least two partners become the LLP by virtue of entering an LLP agreement. However, the partners in an LLP are enjoying the limited liability and as it is highlighted earlier that an LLP has sectional perpetuity like any limited company.
The form of doing business which is categorized as Limited Liability Partnership or LLP as it is known was established in India in the year 2008. The legislation which has bearing in case formation of LLP and the provision governing the operation of LLP is the Limited Liability Partnership Act, 2008 and LLP Rules 2009 in India. Nonetheless it is important to know that LLP can be incorporated by one person and there should be at least two partners. However, there is no restriction as to the maximum number of partners that LLP can be formed till they do not exceed the count of two hundred.
Minimum partners have to be two for the partnership firm and all the partners must be natural individuals, out of those at least one should be an Indian by domicile. As a result, it will be logical to assert that the LLP agreement regulates the accesses and responsibilities concerning the above-mentioned partners. It is their duty to conform with every single clause of the LLP Act, 2008 and the provisions that are required to be incorporated in the LLP agreement from operational procedure.
They differ in their legal standing as is the case with companies.
As provided by the law, LLP is meant to commence with the involvement of at least two persons.
Regarding this factor, one network business can have as many partners as it wants to have, or as many as the two business partners desire to have.
At the very least, two of the partners should be identified in a way that meets this criteria.
It is mandatory that at least one of the partners should be identified and must be a resident of India.
The other feature of this structure is that each partner has the liability of the contribution made by the partner.
It can also be noted that the formation of an LLP is very formal and does not require substantial expenses.
Less compliance and regulations.
This is mainly due to the fact of inadequate capital contribution as required by the law.
Step 1: Obtain Digital Signature Certificate (DSC)
The first and most significant activity indicated in the scenario, in relation with the implementation of the online filing of the taxpayer return is the ‘use of Digital Signature Certificate’. Before this process of registration begins however one has to apply for the digi signatures of the partners in the proposed LLP firm. LLP filing is done online due to the fact that all the documents that are used during incorporation are signed through electronic methods hence online. Thus, for the designated partner to obtain it, he or she has to get it from those agencies that are already in the government’s list of accredited ones. The following is the list of such certified agencies. For this reason, one may find that the prices offered by different certifying agencies for the award of the DSC differ. Thus, to act wisely, it is rather necessary to acquire the class 3 category of DSC.
Step 2: Applicants seeking to become a designated partner should obtain a DPIN.
One has to apply for the DPIN which stands for Designated Partner Identification Number, this is the identification number of a designated partner of the LLP. The application for the DPIN could be made for all the partners as stated for the proposed LLP or anyone who wants to be the designated partner. DPIN is obtained as a result of a filing of a form referred to as the DIR-3 with a view to applying for an allotment which is in accordance with section 145 of the companies Act. In this process, mainly the scanned copies of the documents the required documents include the Aadhar card and the Pan card have to be attached with the said form. The form should also be counter signed by the Company Secretary/ Chartered Accountant/ Cost Accountant who is a full time practitioner. The element which constrains the business capacity of an LLP is there is a rule that only a natural can become a Designated Partner. Therefore, it can be stated that DPIN can be acquired only if the person is natural and cannot be a company, LLP, OPC, association of persons, etc.
Step 3: Name Approval
The meanings of the abbreviation RUN-LLP are the application for the registration of the name for the proposed LLP which would be received by the Central Registration Centre. However, the actual incorporation name cannot be quoted without typing the company search in the MCA portal. The above procedure will display the list of names of other existing companies/ LLPs with almost similar names to the search criteria that is filled up in the system. This will help you distinguish between abilities and pseudonyms in order to solve a given problem. The name so chosen can be approved by the registrar only if it was held to be no longer undesirable by the Central Government and was not identical to the name of any partnership firm or LLP or any body corporate or a registered trademark.
The aforementioned form should be allowed to be re-submitted so that the laced defects are corrected within fifteen days’ time. It is provided that 2 proposed names of the LLP have to be filed. LLPs also need to file the Certificate of Incorporation with the MCA in not more than 3 months after the registration of the name and this should be accompanied by a fee of rupees two hundred only.
Step 4: Incorporation of LLP
The format utilized in the process of incorporation is FiLLiP (Form for incorporation of Limited Liability Partnership) and the same has to be submitted to the Registrar who has the of the state where the LLP is to have its registered office shall have jurisdiction over the matters that are stated in the LLP agreement. Consequently, it is the form that shall be created in the present case and this particular form shall be integrated. Concerning Fees as per Annexure ‘A’, payment should be done. This form also enables one to apply for allotment of DPIN if the proposed designated partner to be appointed in relation to the LLP has no DPIN or DIN.
The application for the allotment has been prescribed for the cases of two individuals only and therefore it shall be so continued. The application for name reservation is also processed through FiLLiP as well and so any business can register their business name through FiLLiP also. If the name applied for is available and has been approved and reserved, then such an approved and reserved name is to be submitted as part of the proposal of the LLP’s name.
A LLP agreement outlines in what manner the partners should be legally connected with one another as well as the relations between the LLP and the partners enter into it. LLP agreement should be filed in Form 3 electronically through the website of the Ministry of corporate affairs MCA Portal. The operative agreement of the LLP also has to be filed with the ROC in form 3 within thirty days of the date of incorporation. In addition to this, the LLP Agreement has to mandatorily be prepared on the Stamp Paper. The fee for Stamp Paper differs from state to another, though Stamp Paper is chargeable on every deed.
|
Form name |
Purpose of the form |
|
FiLLiP |
Form for incorporation of LLP |
|
RUN LLP |
Application for name to be reserved for the LLP |
|
Form 3 |
Information about LLP agreement |
|
Form 8 |
Statement of Account and Solvency |
|
Form 11 |
|
|
Form 24 |
Submission of an application before the Registrar of Companies for deletion of the name of LLP |
Separate legal entity
It has a legal personality like a company and is formed under Companies Act 1956 like a company it has 13-A. ] The LLP has a distinguished legal personality from the partners. Suing and being sued in the business name is an advantage that an LLP possesses by being a legal entity of its own, separate from the partners. Many contracts are often developed and signed via the LLP so as to help foster confidence in the various stakeholders since customers and suppliers, for instance, will be dealing with a being.
Limited liability of the partners
It has a concept of limited liability of the partners from the legal structure, meaning that it is unlikely that shareholders of the partners will lose their worth in the occurrence of business failure.
Once more, it is important to note that LLP is characterized by limited liability concerning the partners of the LLP. It also refers to the fact that the partners’ legal exposure or risk is limited to the amount they committed. This means they will only invest an amount towards the cost and even if business records depict losses, they can never be made to answer it personally. Even in situations when the LLP is insolvent at the time of winding up then only the LLP resources are utilised to pay off the debts. The partners do not have any legal liabilities to the firm or accessories hence qualifier and acceptable as bona fide businessmen.
Low cost and less compliance
Lower costs also imply that compliance with any regulation is not mandatory, thus the regulation does not have to be followed.
When compared with the incorporation of a public or private limited company, it is evident that the formulations of an LLP is much cheaper. The compliance or in other words the legal pitfalls that the LLP has to abide by are also minimalistic. This is because only an LLP is required to file two documents annually; the Annual Return and the Statement of Accounts and Solvency.
No requirement of minimum capital contribution
LLP also like any other partnership form does not have any minimum requirement of share capital. One cannot compare incorporation with other techniques in that it does not have specific requirements that must be fulfilled, say one has to have a certain amount of paid up share capital. As with the invested capital, the amount of capital that can be subjected to the formation of can be a variety of amounts as per the partnership or the association of the members.
Penalty on non-compliance
Legal requirements that are to be complied by LLP are quite limited. But, if the above mentioned compliances are not complied at the appropriate time then the LLP has to suffer heavily. Nevertheless, what needs mentioning is that even if the LLP has no activity in the particular year, it still has to file the return with the MCA within the requisite time frame. Huge penalty has been proposed in case the LLPs do not file the returns then.
Accounting and withdrawal from LLP
One of the legal requirements, it is required that a person who wants to form an LLP must have at least two designates. If the partner’s membership is below two for six continued months, then the LLP will be dissolved. The LLP fails to do so and there is proof that the LLP cannot pay its debts if it is dissolved.
Difficulty to raise capital
Probably it should be noted here that LLP does not have the equity as that of a Company and therefore no shareholders. The LLP cannot be incorporated where the angel investors or the venture capitalists are to be the shareholders in the firm. This is so because the shareholders are partners in the LLP and have to perform all the roles which are expected of a partner in the LLP. As a result, instead of funding an LLP, angel investors and venture capitalists invest in a company – this is the leash that keeps the LLPs from getting the capital they need.
Minimum of two partners.
DSC for all the identified partners.
Hypothesis H1 can therefore be proposed that: DPIN should be higher for all the target partners that were identified by the study.
Alias of the proposed name of LLP which should not be similar to any other already formed LLP or trademark.
Contribution made by other partners of the LLP to the partners’ capital after the initial subscription for the partners’ capital.
Conveyance deed associated with the partners and the LLP that is being formed for carrying out business operations.
Legal document consisting the registered office proof of the LLP.
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