Limited Liability Partnerships have been allowed 100% FDI through automatic route in the recent reforms of FDI making it easier for foreign entities to develop their business in India. Limited liability partnership is a body corporate and legal entity separate from its partners. It enjoys the status of separate legal entity only after incorporation. LLP after registration can hold, acquire or dispose of all kinds of assets. It can sue others and be sued in its own name.
An LLP has a Separate Legal Entity and the LLP is distinct from its partners. An LLP can sue and be sued in its own name. The contracts are signed in the name of the LLP, which helps to gain the trust of various stakeholders and gives the customers and suppliers a sense of confidence in the business.
The partners of the LLP have limited liability. The liability of the partners is limited to the contributions made by them. This means that they are liable to pay only the amount of contributions made by them and are not personally liable for any loss in the business.
The cost of forming an LLP is low compared to the cost of incorporating a public or private limited company. The compliances to be followed by the LLP is also low. The LLP needs to file only two statements annually, i.e. Annual Return and a Statement of Accounts and Solvency.
The LLP can be formed without any minimum capital. There is no requirement of having a minimum paid-up capital before going for incorporation. It can be formed with any amount of capital contributed by the partners.
1. Minimum two partners (Individual or body corporate).
2. Minimum two designated partners who are individuals and at least one of them should be resident in India.
3. Digital signature certificate
4. LLP Name
5. LLP Agreement
6. Registered office
Stepwise procedure for the incorporation of new LLP is discussed as follows :
Step 1. Arrange basic documents of Partners
Step 2. Fill in an online form with accurate information
Step 3. Apply for Digital Signature and DIN of Partners
Step 4. Prepare all legal documents
Step 5. Apply to name availability of the proposed LLP
Step 6. Verification of all documents and forms by the respective Government dept. and authorities
Step 7. File Incorporation Docs with ROC
Step 8. Get LLP Incorporation Certificate
Step 9. Drafting of LLP Agreement
Step 10. Filing of LLP Agreement
| Sr. No. | From Partner : | For Registered Office: |
|---|---|---|
| 1. | Scanned copy of PAN card & Aadhaar Card. | Rent Agreement or the Lease Deed or the Sale Deed of the place being used as Registered Office; or, |
| 2. | Pass-port-sized photographs. | Address Proof of the Registered Office (electricity Bill), make sure that the address proof is not older than 2 months. |
| 3. | Identity Proof (Scanned copy of Voter ID/ Driving License/Passport) | No-Objection Certificate (NOC) signed by the actual owner of the Property. |
| 4. | .Address proof (Scanned copy of Utility Bill – electricity/water/mobile), make sure that the address proof is not older than 2 months. | |
| 5. | Mobile No. & Mail ID |
On getting the certificate of registration from the registrar of companies, the LLP enjoys the status of body corporate and becomes a legal entity separate from its members. Such LLP is entitled to exercise the following rights:
1. It can sue and be sued by others in its own name.
2. It can acquire, own, hold, develop or dispose of property whether movable or immovable, tangible or intangible.
3. It may have a common seal. Thus it is not mandatory for LLP to have a common seal.
4. It can do and suffer such other acts and things as bodies corporate may lawfully do and suffer.
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As per the LLP Act, 2008 read with the applicable rules, the full form of LLP is Limited Liability Partnership.
LLP is a type of Business entity which offers the benefit of Limited Liability of Company and flexibility of partnership. The Partners Liability is limited to the extent of contribution made by the partners.
The minimum number of partners required for forming LLP is two.
A minimum two partners are required to incorporate Limited Liability Partnership and registered office of the LLP is required to be located in india.
To get LLP registered, you need to apply for obtaining DPIN i.e. Designated Partner Identification Number which can be done by filing in e-form also apply for Digital Signature Certificate and get it registered on MCA portal.
The following is the procedure for incorporation of Limited Liability Partnership:
1. Get Digital Signature Certificate
2. Obtain Designated Partner Identification Number (DPIN)
3. Select appropriate name for LLP
4. Search if name of LLP is already available if not, then apply for that name for proposed LLP through RUN i.e. “Reserve your Unique Name” service
5. After the approval of such name from ROC , start applying for incorporation of LLP in e-form 2
6. After the approval of such name from ROC , start applying for incorporation of LLP in e-form 2
7. At last file Limited Liability Partnership Agreement in e-form-3.
Yes, through LLP form 17, LLP form 2 and LLP form 3 an existing partnership can get converted into LLP .
Any individual or body corporate may be a partner in an LLP, however an individual shall not be capable of becoming a partner in LLP-
1. If he has been found to be unsound mind by court of competent jurisdiction
2. If he has been undischarged insolvent or
3. If he has applied to be adjudicated as an insolvent and his application is pending.
The following documents are required for LLP incorporation :
1. PAN Card of all the partners
2. Proof of Identity of all the partners
3. Proof of Address of all the partners
4. Utility Bill of the proposed registered office of LLP
5. No-objection certificate from the landlord
6. Rental Agreement Copy between LLP and partners
1. It is easier to start LLP which has few formalities
2. It has lesser cost of registration as compared to Company
3. LLP has its own existence other than its partners
4. There is a minimum amount capital required for LLP formation
5. There is no requirement of compulsory Audit
Stamp paper should be bought in the name of LLP , However the agreement should be signed by all the partners to express their consent for all terms and conditions mentioned in the agreement.
An LLP is liable to the extent of its assets but liability of partners is limited to their contribution in LLP. Hence the Creditors of the Limited Liability Partnership are not creditors of individual partners.
Designated Partner are like Directors and Partners are like shareholders. The Liability of Partners is limited to partnership agreement. The Designated Partners are responsible towards the day to day affairs of LLP .
Before closing a current account of LLP first need to make sure that there is no assets and balance lying in current account, once it is confirmed that there is no balance available in current account, Designated partner can approach to the Bank for closure of Current account which is in the name of LLP.
By introducing the Limited Liability Partnership (Amendment) Rules 2017, the Ministry of Corporate Affairs has recently introduced e-form 24 for closure of LLP by making an application to ROC.
LLP can be closed by voluntary winding up and compulsory winding up.
1. If tribunal found that LLP decides that LLP be wound up,
2. if for a period of more than 6 months the number of partners are reduced below two.
3. If the Limited Liability Partnership is unable to pay its debts
4. If LLP has made a default in filing with registrar the statement of account and solvency or annual return for consecutively five financial years.
5. If the tribunal is of the opinion that it is just and equitable that Limited Liability Partnership be wound up.
1. The LLP can make application for closing and removal of its name through e-form 24
2. On receipt of application registrar send all partners and LLP notice of his intention to remove the name of LLP from the register and request them sent their representations along with the copies of relevant documents within 30 days from the date of notice.
3. If there are no adverse representations from LLP partners or general public then registrar if satisfied, strike off the LLP name from the register and publish a notice in the news paper.
An application to be made in e-form 24 with ROC with following documents :
1. A Statement of Accounts disclosing nil assets and liabilities and certified by a Chartered accountant in practice made up to date not earlier than 30 days of the date of application.
2. Copy of acknowledgement of latest income tax return
3. An affidavit signed by designated partners either jointly or severally
4. Copy of authority to make application
5. File all overdue returns if you have not filed return for last year before which you have already ceased business operations of LLP.
6. Copy of initial Limited Liability Partnership Agreement if entered into and not filed along with changes thereof in cases where the LLP has not commenced the business or commercial operations since its incorporation.
The Date of cessation of commercial operations is the date from which the Limited Liability Partnership ceased to carry on its revenue generating business.