Limited Liability Partnership and its Incorporation (LLP)

It is an association of 2 or more persons who have set up this business structure for carrying on a lawful business with a view to profit, with the partners having a limited state of liability. LLPs are governed under the Limited liability Partnership Act, 2008. It can be said that LLP is a combination of Partnership and Private Limited Company as it encompasses features of both. Limited liability partnerships are distinct from limited partnerships in some countries, which may allow all LLP partners to have limited liability, while a limited partnership may require at least one unlimited partner and allow others to assume the role of a passive and limited liability investor. As a result, in these countries, the LLP is more suited for businesses in which all investors wish to take an active role in management.

How to Incorporate a New Limited Liability Partnership

A Limited Liability Partnership may be incorporated as per the procedure explained below :

Registration

Register yourself on the website of Ministry of Corporate Affairs, developed for LLP services . Fill in the registration form then select your user name and password. Therein, upload digital signature certificate.

Designated Partners Identification Number (DPIN)

All designated partners of the proposed LLP shall obtain “Designated Partner Identification Number (DPIN) / Director Identification Number (DIN)”.

Digital Signature Certificate

Partners/Designated partners whose signatures are to be affixed on the e-forms has to obtain class 2 or class 3 Digital Signature Certificate (DSC) from any authorised certifying agency.

Name reservation

Log on to the LLP portal. After login, click “E-Forms” link. Open Form-1 for reservation of name and fill in the details. Choose the name of the proposed LLP (upto 6 choices can be indicated). After this attach the digital signatures and submit the e-form and pay the necessary fee.

Details of minimum two designated partners of the proposed LLP, (at least one of them must be a resident of India) is required to be filled in the application for reservation of name. Only individuals or nominees on behalf of the bodies corporate as partners can act as designated partners.

Incorporation of LLP

Once the name is reserved by the Registrar, log on to the portal and fill up Form-2 “Incorporation Document and Statement”.
Pay the prescribed registration fee as per the slab given in LLP Rules, 2009, based on the total monetary value of contribution of partners in the proposed LLP. Statement in the e-form is to be digitally signed by a person named in the incorporation document as a designated partner having permanent DPIN and also to be digitally signed by an advocate/company secretary/chartered accountant/cost accountant in practice and engaged in the formation of LLP . On submission of complete documents, the Registrar after satisfying himself about compliance with relevant provisions of the LLP Act can register the LLP, maximum within 14 days of filing of Form-2 and will issue a certificate of incorporation in Form-16.

Incorporation documents must be filed with the following attachments.

1. Copy of authorisation where the partner is a limited liability partnership, or company, or a limited liability partnership incorporated outside India or a company incorporated outside India.
2. Proof of address of registered office of limited liability partnership.
3. Details in respect of names of partners/witnesses and their signatures.
4. Attachments in respect of details of individuals/bodies corporate where the number exceeds five.
5. Optional attachments as may be required.

LLP agreement must be filed in (E-Form 3) with the Registrar within 30 days of incorporation.
The LLP Agreement must be stamped in accordance with the stamp Act.

CHARACTERSTICS

Separate legal entity : Like a company LLP also has a separate legal entity. So the partners and the LLP are distinct from each other.

No requirement of minimum capital : In case of companies there should be a minimum amount of capital that should be brought by the members or owners who want to form it. But to start an LLP there is no requirement of minimum capital.

Minimum number of members : To start a limited liability partnership at least two members are required initially. However, there is no mentioned limit on the maximum number of partners.

No requirement of compulsory audit : All the companiesare required to get their accounts audited. But in case of LLP, there is no such mandatory requirement.

BENEFITS

• It is flexible to organise the internal structure of an LLP
• There is no maximum limit for the no. of partners in LLP
• Raising and utilisation of funds depends on the partners will
• LLP is exempted of Dividend Distribution Tax (DDT)
• The partners have limited liability
• There is no requirement of minimum capital
• One can easily become a Partner or leave the LLP
• An LLP can easily attract finance from PE Investors, financial institutions, etc.

DEMERITS

• Any act of the Partner without the other partner , may blind the LLP
• LLP cannot raise money from public, unlike a company.
• Angel investor or venture capital firm does not prefer LLP