Limited Liability Partnership (LLP) is a business structure that offers the benefits of both a partnership and a corporation. In India, it is governed by the Limited Liability Partnership Act, 2008 and the corporate laws in India. LLP offers limited liability protection to its partners, allowing them to conduct business with peace of mind. It is a popular choice for small and medium enterprises due to its flexibility and ease of compliance.
LLP is a body corporate having separate entity from its partners and perpetual succession. It is governed by the Limited Liability Partnership Act, 2008, so the Indian Partnership Act, 1932, does not apply. It results from an agreement between the partners, and the mutual rights and duties of partners of an LLP are determined by the said agreement subject to the provisions of the LLP Act, 2008.
LLP is also a separate legal entity liable for all its assets and liabilities, limiting its partners only to their contributions, just like a company. No partner will be individually liable for any wrongful act of other partners. However, if the LP was formed to defraud creditors or for any fraudulent purpose, then the partners' liability who had the knowledge of it will be unlimited.
There must be at least two designated partners in every LLP who shall be residents of India. Annual accounts shall be maintained in order to show the true state of affairs of the LLP; this should also be filed with the registrar regularly. The central government may investigate an LLP's affairs by appointing a competent inspector whenever it deems fit. It also enables the central government to apply the provisions of the Companies Act whenever it things appropriate.
Procedure to register a Limited Liability Partnership
Getting your company registered as a Limited Liability Partnership without help can be a little overwhelming. Finding a lawyer who can handhold you through the process is a great way to start without losing your focus on the principal matters.
Following are the steps to register a Limited Liability Partnership Company -
Step 1: Obtain Director’s Identification Number (DIN)
To become a designated partner of the LLP, they must obtain a DIN. Application for DIN can be made online through the Ministry of Corporate Affairs (MCA) website. Submission can be made in e-form DIR-3. There is no physical submission, and the entire activity has to be done on the web. Some of the following important documents to be submitted for that are:-
- Proof of Identity - In case of Indian Nationals - PAN card, while in case of Foreign Nationals - Passport
- Proof of Residence - Passport, Election Card, Ration Card, Driving license, Electricity bill, Telephone bill, or Bank account statement. Electricity or telephone bills shouldn't be older than two months.
- Affidavit as per Annexure 1 of DIN Rules has to be made by applicants on Stamp Papers, which shall also be notarized.
Step 2: Register Digital signature of Designated partners
The applicants whose signatures would be placed on the application forms must have a Class 2 Digital Signature Certificate(DSC) from any authorized certifying agency. This Digital Signature Certificate has to be registered on the MCA website.
Read more: How To Incorporate A Company?
Step 3: File Form 1 for name availability
Once two DINs are available, apply for reservation of a name can be made to the MCA. Certain guidelines to be kept in mind while deciding on the name of LLP are:-
- Name should be original, unique, and easy to remember
- Should not contain sensitive words like 'British India' and 'Tribunal.'
- It must end its name with either 'Partnership' or 'LLP.'
- It should not be offensive in any manner
- It should not show any connection with the National leader
- Applicant can place 6 choices for names in the form, which should be unique
- The name should not depict any connection with government bodies.
Once the MCA accepts the name approval application, an LLP name approval letter will be issued to the proposed partners. The partners then have 90 days to file the required incorporation documents and register the LLP. In case the LLP is not formed within 90 days of the name approval letter, the approval for the name for the LLP would have to be obtained again.
Step 4: Filing of FORM 2 for incorporation and subscription document
After receiving the name approval letter from ROC, the incorporation document shall be filed in FORM 2 with the Registrar within 60 days from the date of name approval. The form must be digitally signed by a person named a designated partner having DIN, including a digital signature of an advocate/CS/CA in practice.
Documents like the proof address of the registered office of LLP, LLP details, and subscribers’ sheet, including consent on form 9, have to give to ROC.
After the Registrar is satisfied that all the formalities have been complied with, he will issue a Certificate of Incorporation as to the formation of the LLP within a maximum of 14 days from the date of filing documents.
The Certificate of Incorporation shall come to an end on the formation of the LLP. Once incorporated, every LLP so registered shall be allocated an LLP identification number (LLPIN) in one following series.
Step 5: Drafting & Filing of LLP agreement
After incorporation of LLP, the LLP agreement has to be drafted in accordance with the LLP Act.
Within 30 days of incorporation, an LLP agreement has to be filed. The designated partners have to file the information in Form 3. The LLP agreement must be uploaded as an attachment to Form 3 in the Ministry of Corporate Affairs (MCA) portal.
Once it gets approved, all the formalities for registration of LLP are deemed to have been completed.
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