Introduction
Limited Liability Partnership is a legal form of business entity with the limited liability of the partners. It is an alternative corporate business vehicle that not only gives the benefits of limited liability at low compliance but also allows its partners the flexibility of organising internal structure as a traditional partnership.
It is a separate form of legal entity, as the LLP itself will be liable to the full extent of the assets as the liability of its partners are limited to the capital contribution or to the extent of their investment made. It is an alternative form of corporate business that gives the benefits of a limited liability of the company and the flexibility of a partnership firm.
Applicable Legal Frameworks
- Governed by the Limited Liability Partnership Act 2008.
- Regulated by the Ministry of Corporate Affairs.
- Mandatory to register through MCA Portal.
Characteristics of a Limited Liability Partnership
- LLP is a Body corporate : It is a legal entity separate from that of its partners and shall have perpetual succession. Any change in the partners of the entity will not affect the existence, rights or liabilities of the LLP.
- Perpetual Succession : LLP can continue its existence irrespective of change in the partners. Death, insanity, retirement or insolvency of the partners will have no impact on the entity. It is capable of entering into contracts and holding property in its name.
- Separate Legal Entity : It is a separate legal entity from that of its partners. The LLP is liable to full extent of its assets but liability of the partners is limited to the contribution of the partners.
- Mutual Agency : No partner is liable for the acts of the other partners. The individual partners are protected from the joint liability created by the other partner’s wrongful business decisions or misconduct.
- LLP Agreement : The rights and duties of the partners are governed by the LLP agreement. In case of absence of agreement between the partners, the rights and duties of the partners are governed by Schedule I of the Limited Liability Partnership Act.
- Artificial Legal Person : The entity is a artificial legal person since it is created by a legal process and is clothed with all rights of an individual. A LLP is invisible, intangible, immortal (dissolved by law alone) but not fictitious since it exists really.
- Common Seal : A LLP may have a common seal, if it decides to have, it is not mandatory to have a common seal. It shall remain under the custody of some responsible official and it shall be affixed in the presence of at least 2 designated partners of the LLP.
- Limited Liability : The liability of the partners will be limited to the capital contribution. Such contribution may be of tangible or intangible nature or both.
- Management of Business : The partners of the LLP are entitled to manage the business of the entity. Only the designated partners are responsible for the legal compliances.
- Minimum and Maximum number of partners : A minimum of 2 partners and also shall have at least 2 individuals as designated partners of which at least one shall be resident in India. There is no maximum limit for partners of the LLP.
- Compromise or Arrangement : Any compromise or arrangement including merger or amalgamation shall be in accordance with the provisions of the Limited Liability Partnership Act 2008.
- Conversion into LLP : A firm, private company or unlisted public company would be allowed to be converted into Limited Liability Partnership in accordance with the provisions of this Act.
- E-Filing Documents : Every form or application of document required to be submitted shall be filed in electronic form on the website www.mca.gov.in and authenticated by a partner or designated partner of the Limited Liability Partnership by the use of DSC (Digital Signature Certificate)
Advantages of forming a Limited Liability Partnership
Limited Liability Partnership is a form of business model which :
- Is organised and operates on the basis of an agreement.
- Provides flexibility without imposing detailed legal and procedural requirements.
- Easy to form and easy to dissolve.
- All partners of the firm enjoy limited liability.
Minimum number of partners
Every Limited Liability Partnership shall have a minimum of two partners
If at any time the minimum number of partners is reduced below two and the entity carries on the business for more than six months while the partners are reduced, the person who is the only partner is personally liable for the obligations of the entity incurred during that period.
Pre-requisites for Incorporating a Limited Liability Partnership
Before applying for Incorporation of a Limited Liability Partnership ensure the following details are kept ready:
- Ensure that there are minimum 2 partners.
- Digital Signature for all partners (if already available)
- Designated Partner Identification Number or Director Identification number (if already available)
- Name of the Limited Liability Partnership (approved by the MCA)
- Proof registered office address of the Limited Liability Partnership.
- Proof of residential address of the partners.
Steps to Incorporate a Limited Liability Partnership
Step 1 : Reservation of Name of LLP – Applicant has to file e-Form RUNLLP for ascertaining the availability and reservation of the name of a Limited Liability Partnership.
Step 2 : File e-Form FiLLip for incorporating a new LLP – contains the details of the proposed Limited Liability Partnership, details of partners / designated partners and their consent.
Step 3 : Execution of LLP Agreement is mandatory. It will be filed in e-Form 3 within 30 days of incorporation of LLP.
Post Incorporation Compliance
Once the Limited Liability Partnership is incorporated the following the compliances are required are to be complied:
- File LLP Agreement (Form 3).
- Apply for PAN & TAN.
- Register under GST (if applicable).
- Open a bank account in the Limited Liability Partnership’s name.
- Comply with annual filings:
- Form 11 (Annual Return).
- Form 8 (Statement of Accounts & Solvency).
Conclusion
Incorporating a Limited Liability Partnership is a simple and cost effective way to start a business. With limited liability of the partners and separate legal identity, and fewer compliance it is a right choice for startups, freelancers and professionals looking to scale up their business with ease.
Our Services
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LLP Incorporation Services
Name Approval
Assistance with RUN/DPIN, selecting and reserving the perfect LLP name.
DSC & PAN/TAN
Digital signature certificate setup and PAN/TAN registration for your LLP.
LLP Agreement Drafting
Expertly drafted LLP agreements tailored to your business structure.
ROC Filing
Accurate submission of incorporation forms to the Registrar of Companies.
Post-Incorporation Compliance
Ongoing compliance assistance including bookkeeping setup and filings.
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