Limited Liability Partnership (LLP)
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Limited Liability Partnership (LLP)
Registration of Limited Liability Partnerships (LLPs) in India
Limited Liability Partnerships (LLPs) have become the favored form of organization among Indian entrepreneurs. An LLP combines the benefits of a partnership with a business. As the name implies, an LLP is a partnership firm formed by at least two participants who sign an LLP agreement. However, an LLP's partners have limited responsibility, and the LLP, like a company, has a perpetual succession.
The concept of a Limited Liability Partnership (LLP) was introduced to India in 2008. The Limited Liability Partnership Act of 2008 governs LLPs in India. A minimum of two partners are necessary to form an LLP. However, there is no limit to the maximum number of partners in an LLP.
There should be at least two selected partners who are natural people, one of them should be a resident of India. The chosen partners' rights and duties are governed by the LLP agreement. They are directly responsible for ensuring that the provisions of the LLP Act, 2008, as well as the LLP agreement, are followed.
LLP Features
- It has a separate legal entity, exactly like a company.
- To establish an LLP, at least two people must come together as partners.
- There is no restriction to the maximum number of partners.
- There must be at least two designated partners.
- One of the selected partners must be a resident of India.
- Each partner's liability is limited to their contribution.
- The expense of establishing an LLP is cheap.
- Reduced compliance and restrictions.
- No necessity for a minimum capital contribution.
There is no minimum capital contribution requirement.
There is no minimum capital required to form an LLP. Prior to filing for incorporation, there is no minimum paid-up capital requirement. Any quantity of money supplied by the partners can be used to form it.
Low expense and minimal compliance
Compared to the expense of incorporating a public or private limited business, the formation of an LLP is less expensive. The LLP's compliance requirements are likewise minimal. Only the Annual Return and the Statement of Accounts and Solvency are required to be filed by the LLP each year.
Separate legal entity
Like a company, an LLP is a distinct legal entity. The LLP is not the same as its partners. An LLP may file and receive lawsuits under its own name. Customers and suppliers feel more confident in the company because the contracts are signed in the LLP's name, which aids in gaining the trust of numerous stakeholders.
Partners' limited liability
The LLP's partners' liability is restricted. The partners' liability is restricted to what they have contributed. This implies that they are not individually responsible for any losses incurred by the company and are only obligated to pay the sum of their contributions. Only the LLP's assets are responsible for paying off its debts if it becomes insolvent during winding up. The partners are free to conduct themselves as respectable businesspeople because they have no personal obligations.
LLP winding up and dissolution
An LLP must have at least two partners. The LLP will be dissolved if the minimum number of partners is less than two for six months. If the LLP can't pay its bills, it might be dissolved.
Penalties for noncompliance
There is very little compliance an LLP must adhere to. However, the LLP will be subject to a significant penalty if these compliances are not finished on time. The LLP must submit returns to the Ministry of Corporate Affairs (MCA) every year, even if it has no activities during the year. The LLP will be subject to a severe penalty if the returns are not filed.
Raising finance is difficult.
Unlike a firm, an LLP lacks the notion of equity and shareholders. Venture capitalists and angel investors are not permitted to become shareholders in the LLP. This is due to the fact that shareholders are required to be LLP partners and assume all partner responsibilities. As a result, it is challenging for LLPs to raise financing because venture capitalists and angel investors would rather invest in a business than an LLP.
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Procedure for LLP Registration
1. Acquire a Digital Signature Certificate (DSC).
You must request the digital signatures of the proposed LLP's chosen partners before beginning the registration process. This is due to the fact that all LLP paperwork must be digitally signed and filed online. Therefore, the selected partner needs to have their digital signature certificates from certifying organizations that are approved by the government. These certified agencies are listed here. The certifying agency determines the cost of obtaining DSC. Additionally, you ought to gain DSC's class 3 category.
2. Request a DPIN (Designated Partner Identification Number).
You must submit an application for the DPIN of each designated partner or prospective designated partner of the proposed LLP. Form DIR-3 must be used to submit an application for DPIN allocation. The scanned copies of your documents—typically your PAN and Aadhaar—must be attached to the form. A full-time company secretary, chartered accountant, or cost accountant should also sign the document.
An LLP's Designated Partner can only be a natural person. Therefore, only natural humans—not artificial legal entities like a business, LLP, OPC, association of persons, etc.—may get the DPIN.
3. Approval of the Name
A RUN-LLP (Reserve Unique Name-Limited Liability Partnership) application is submitted to reserve the proposed LLP's name, which will be handled by the Central Registration Center. However, it is advised that you use the MCA portal's free name search feature before mentioning the name in the form.
Based on the search parameters entered, the system will offer a list of names of current businesses or LLPs that are very similar. This will assist you in selecting names that are distinct from those that currently exist. Only if the name is not deemed undesirable by the Central Government and does not like any already-existing partnership firm, LLP, body corporate, or trademark will the registrar allow it.
The form may be resubmitted within 15 days in order to correct the errors. There is a clause allowing for two suggested LLP names. After the MCA approves your name, you have three months to apply for LLP incorporation.
4. LLP incorporation
- The FiLLiP (Form for incorporation of Limited Liability Partnership) is the form used for incorporation, and it must be submitted to the Registrar who has jurisdiction over the state where the LLP's registered office is located. It will be an integrated shape.
- The fees listed in Annexure "A" must be paid.
- If a person to be appointed as a designated partner does not have a DPIN or DIN, this form also allows them to apply for a DPIN.
- Only two people may apply for an allotment.
- You can also use FiLLiP to reserve a name.
- The authorized and reserved name will be used as the proposed name of the LLP if the application is accepted.
Step 5: Submit an LLP (limited liability partnership) agreement
Mutual rights and obligations between partners as well as between the LLP and its partners are governed by the LLP agreement.
- LLP agreements must be submitted online via the MCA Portal using Form 3.
- The LLP agreement's Form 3 must be submitted within 30 days of the incorporation date.
- Stamp paper must be used to print the LLP Agreement. Each state has a different stamp paper value.
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NOTE:
- A driver's license, bank statement, residence card, or any other government-issued identity document with the address must be submitted by foreign nationals or NRIs as proof of address.A notarized or apostilled translation copy will also be included if the documents are not in English.
- A rent agreement and a no-objection certificate from the landlord are required if the registered office is rented. The landlord's approval for the LLP to use the space as a "registered office" will take the form of a no objection certificate.
Additionally, all utility bills, including gas, electricity, and phone bills, must be turned in. The bill should be no more than two months old and include the owner's name and the full address of the property.
LLP Registration Checklist
- Minimum of two partners.
- DSC for all designated partners.
- DPIN for all designated partners.
- Name of the LLP, which is not similar to any existing LLP or trademark.
- Capital contribution by the partners of the LLP.
- LLP Agreement between the partners.
- Proof of registered office of the LLP.
LLP Forms
The following are the important LLP Forms:
Frequently Asked Questions (FAQs)
To conduct business, an LLP needs to be registered under the LLP Act. However, the Partnership Act of 1932 states that a partnership firm's registration is optional. In an LLP, each partner's liability is capped to the amount they contributed. However, each participant in a partnership firm has personal responsibility for the company's losses and obligations.
The LLP can purchase real estate, file lawsuits, and be sued in its name because it is a distinct legal entity. Partnership firms are not allowed to purchase real estate or file lawsuits on behalf of partners. Since the partnership firm lacks a distinct legal organization, it must be in the name of the authorized partner.
Indeed, it is necessary for an LLP to register on the Ministry of Corporate (MCA) portal. To be a legally recognized entity, an LLP must register under the Limited Liability Partnership (LLP) Act.
By agreeing to it and following the terms of the LLP agreement, any individual partner may become a designated partner in an LLP. It is not possible for a body corporate to be a designated partner. If the LLP agreement specifies so, all partners may be declared partners.
No, the Articles of Association (AOA) and the Memorandum of Association (MOA) are crucial records of a business that is registered under the Companies Act of 2013. The MOA and AOA are not governed by the LLP agreement. Therefore, the MOA and AOA do not need to be drafted by an LLP. The LLP agreement must be drafted by it.
The MCA assigns the designated partner of an LLP a unique number known as the Designated Partner Identification Number (DPIN). A director's Director Identification Number (DIN) is comparable to the DPIN. Any anyone can apply for a DPIN to become a designated partner of an already-existing LLP, or they can receive one when registering an LLP.
A minimum of two authorized partners, at least one of whom must reside in India, are required for any LLP. At least two individual nominees of body corporates should serve as designated partners in an LLP if all of the partners are body corporates. According to the terms of the LLP agreement, any partner may be a designated partner.
An LLP can have any individual or corporate entity as a partner. However, an LLP cannot have children, people of unsound mind, or an undischarged insolvent as partners.
If an LLP's number of partners drops to one at any point, that one partner may continue the LLP's operations for a period of six months. If the LLP still has just one member after six months and that partner conducts business on behalf of the LLP, that partner will be held personally accountable for the LLP's debts. When an LLP has fewer than two partners for longer than six months, the National Company Law Tribunal has the authority to wind it up.
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