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What is Limited Liability Partnership ?

A Limited Liability Partnership (LLP) is a form of business organisation where the liability held by each of the partners is limited by law. It is a corporate business vehicle that enables professional expertise and entrepreneurial initiative to combine and operate in a flexible, innovative, and efficient manner. Since LLPs contain elements of both :- a corporate structure as well as a partnership firm structure, they are a hybrid between a company and a partnership (retain the partnership model but are closer to corporations in design and function).

LLP is a body corporate formed and incorporated under the LLP Act, which is a distinct legal entity separate from that of its partners. Introducing LLPs, as a new business structure would fill the gap between business firms such as sole proprietorship and partnership, which are generally unregulated and Limited Liability Companies, which are governed by the Companies Act, 1956.

What are the Advantages Benefits of LLP ?

  1. Renowned form of business in comparison to Partnership :- Though the concept of Limited Liability Partnership has been recently introduced in India, but it is a very popular concept in other countries of the world, especially in service sector.
  2. Easy to form and low cost of formation :- It is very easy to form LLP, as the underlying process is quite simple as compared to formation of Companies and does not involve much formalities. There is no requirement of any minimum capital contribution by a partner. Also, no restrictions as to maximum number of partners.
  3. Corporate structure with separate legal entity and perpetual succession :- LLP is a Body corporate separate from its partners and enjoys perpetual succession irrespective of change of partners.
  4. Capacity to sue while shielding the partners :- As a juristic legal person, a LLP can sue in it’s name and can be sued by others. The partners are not liable to be sued for dues against the LLP.
  5. Ease and flexible to manage and run :- LLP Act, 2009 gives LLP the utmost freedom to manage its own affairs. Partners can decide the way they want to run and manage the LLP by mentioning the terms in the LLP Agreement. There is less Government intervention, unlike a Company. An LLP can be easily dissolved or wound-up unlike a company.
  6. Limited Liability :- An LLP exists as a separate legal entity from one’s personal life. Both LLP and persons, who own it, are separate entities, and both function separately. Liability for repayment of debts and lawsuits incurred by the LLP lies on it and not on the owner.
  7. Easily transferable ownership :- It is easy to become a partner or leave the LLP and so it is easy to transfer the ownership in accordance with the terms of the LLP Agreement.
  8. Taxation :- Another main benefit of incorporation is the taxation of a LLP. LLP is taxed at a lower rate as compared to a Company. LLP is also not subject to Dividend Distribution Tax as compared to company, so there will not be any tax when one distributes profits to one’s partners.
  9. Raising money :- Financing a small business like sole proprietorship or partnership can be difficult at times. An LLP being a regulated entity like company can attract finance from PE Investors, Financial Institutions, etc.

Difference between LLP and general Partnership :-

A partnership has no separate legal status apart from its partners, as the partners are individually known as a partner and collectively known as firm. Unlike, LLP which is a separate legal entity.
The partnership is defined as an association of persons joined for earning profits from business, undertaken by all the partners or any one partner on behalf of all the partners. Limited Liability Partnership is a form of business operation which combines the features of a partnership and a body corporate.
The maintenance and audit of books of accounts is not mandatory for a partnership, As against this, the LLP is required to maintain and audit books of accounts if turnover and capital contribution overreaches 40 lakhs and 25 lakhs respectively
Any two persons can start a partnership or LLP, but the maximum number of partners in a partnership firm are limited to 100 partners. In contrast, there is no limit of maximum partners in LLP.
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How to Incorporate a Company under the Companies Act ?

Two or more persons (natural or artificial) intending to carry out a lawful business with a view to make profit can form a LLP. If any partner is a body corporate, then it will be required to nominate any person (natural) as its nominee for the purpose of incorporation of LLP. The steps involved in incorporation are:

User Registration

  • Register yourself on the website of Ministry of Corporate Affairs, developed for LLP services, i.e,. llp.gov.in. This website may also be accessed through the website of the ministry www.mca.gov.in. On the home page of the URL www.llp.gov.in, click “Register” tab on top right hand corner of the page.
  • Fill in the registration form. Fields marked * in the form are to be mandatorily filled. Select your user name and password.
  • Upload digital signature certificate.
  • On successful registration, system will give a message that you have been registered successfully.

Obtain Designated Partners Identification Number (DPIN)

  • All designated partners of the proposed LLP shall obtain “Designated Partner Identification Number (DPIN) / Director Identification Number (DIN).”
  • DPIN/DIN may be applied from :- http://www.mca.gov.in/MCA21/Din.html.
  • You need to file eForm DIR-3 in order to obtain DIN or DPIN. In case you already have a DIN (Director Identification Number), the same can be used as a DPIN.

Digital Signature Certificate

  • Partner/Designated partner of LLP/proposed LLP, whose signatures are to be affixed on the e-forms has to obtain class 2 or class 3 Digital Signature Certificate (DSC) from any authorized certifying agency, details of which are available on the home page of the LLP portal under the tab “Certifying Authorities”.

Reservation of name

  • Log on to the LLP portal by clicking the “log in” tab on the top right corner of the homepage and enter your username and password. After login, click “E-Forms” link.
  • Open Form-1 for reservation of name and fill in the details. Select name of the proposed LLP (up to 6 choices can be indicated).
  • Any partner or designated partner in the proposed LLP may submit Form-1.
  • Append digital signatures and submit the e-form.
  • Pay the necessary fee by credit card (master/visa).
  • Free name search facility (of existing companies/LLPs) is available on MCA portal (hyper link available on LLP portal). The system will provide the list of similar/closely resembling names of existing companies/LLPs based on the search criteria filled up.
  • Details of minimum two designated partners of the proposed LLP, 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.
  • Check status of your application by logging on the portal. Once the form has been approved by the concerned official of the Ministry, you will receive an email regarding the same and the status of the form will get changed to Approved.

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.” The following details are required to be filled in :-
  1. state the name of the limited liability partnership;
  2. state the proposed business of the limited liability partnership;
  3. state the address of the registered office of the limited liability partnership;
  4. state the name and address of each of the persons who are to be partners of the limited liability partnership on incorporation;
  5. state the name and address of the persons who are to be designated partners of the limited liability partnership on incorporation;
  6. such other information concerning the proposed limited liability partnership as may be prescribed;
  • Pay the prescribed registration fee as per the slab given in Annexure A of the 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. The statement shall mention that all the requirements of this Act and the Rules made thereunder have been complied with, in respect of incorporation and matters precedent and incidental.
  • On submission of complete documents, the Registrar after satisfying himself about compliance with relevant provisions of the LLP Act will register the LLP, maximum within 14 days of filing of Form-2 and will issue a certificate of incorporation in Form-16.
  • You can check status of your application by logging on to the portal.
  • The Certificate of Incorporation issued shall be the conclusive evidence of formation of the LLP.

Filing of LLP agreement (Form-3) and Partners’ details (Form-4) :-

  • Form 3 (Information with regard to LLP agreement and changes, if any made therein) and Form-4 (Notice of Appointment of Partner/Designate Partner, his consent etc.) may be filed with the prescribed fee simultaneously at the time of filing Form-2 or within 30 days of the date of incorporation or within 30 days of such subsequent changes.

What are the required Documents ?

Important considerations for the purpose of Compliances :-

  • It is mandatory for every LLP to file the return of income irrespective of amount of income or loss.
  • E-filing of GST returns is to be carried out using digital signature.
  • As per LLP Act, 2008, every LLP whose annual turnover exceeds Rs. 40 Lakhs or whose Capital contribution exceeds Rs. 25 Lakhs is required to carry out Statutory audit of its financial accounts by a chartered account.
  • As per Income Tax Act, 1961, every LLP which is doing business and whose annual turnover exceeds Rs. 1 crore is required to carry out Tax audit of its financial accounts by a chartered accountant. This limit is fifty lakh rupees if the LLP is involved in a profession.
  • A LLP which is liable to get its account audited under section 44AB shall furnish return electronically under digital signature and shall pay tax by e-Payment mode.

Types of Compliances :-

The statutory compliances for a Limited Liability Partnership firm depend upon various registrations under which the firm is registered. The basic but most important compliances include :-

  • Preparation of financial statements.
  • Tax audit of financial statements, if required as per the provisions.

Do you still have few more Questions ?

Let us help!

Yes, an existing partnership firm can be converted into LLP by complying with the Provisions of clause 58 and Schedule II of the LLP Act. Form 17 needs to be filed along with Form 2 for such conversion and incorporation of LLP.

Yes, any existing private company or existing unlisted public company can be converted into LLP by complying with the Provisions of clause 58 and Schedule III and IV of the LLP Act. Form 18 needs to be filed with the registrar along with Form 2 for such conversion.

No, only private / unlisted public company can be converted into LLP.

File LLP Form No. 1 (Application for reservation or change of name) by logging on to the LLP portal along with the fee prescribed and attaching the digital signature of the designated partner proposing to incorporate a LLP.

Also, refer the LLP name availability guidelines prescribed under section-15 read with Rule-18 of LLP Rules, 2009.

The approved name of LLP shall be valid for a period of 3 months from the date of approval. If the proposed LLP is not incorporated within such period, the name shall be lapsed and will be available for other applicant/ LLP. Please note that there shall not be any provision for renewal of the name.

No, name of the LLP shall end with either ‘Limited Liability Partnership’ or ‘LLP’. Word ‘limited’ shall be allowed in name only within ‘Limited Liability Partnership’.

Yes, it mandatory to execute and file LLP Agreement in view of Section 2(0) & (q) , 22 and 23 of the Act.

As per provisions of the LLP Act, in the absence of agreement as to any matter, the mutual rights and liabilities shall be as provided for under Schedule I to the Act. Therefore, in case any LLP proposes to exclude provisions/requirements of Schedule I to the Act, it would have to enter into an LLP Agreement, specifically excluding applicability of any or all paragraphs of Schedule I.

Scope of Our Services :-

The process of incorporation of a LLP is quite complex and has to pass through several stages. The incorporation is regulated as per the guidelines issued under the statute. Furnishing of wrong details may put you into trouble. It is highly recommended that you seek the help of a professional for Incorporation of your LLP in an expeditious, smooth and error-free manner. We are just a phone call away to serve you for all your needs in this regard.

Upon receipt of your call, our representative shall arrange a meeting with you at your time of convenience. During the meeting he shall explain you the whole process of Incorporation of LLP and thereafter obtain all necessary details pertaining to partners, designated partners, proposed LLP name, Incorporation details, etc. on several pre-printed template forms specially designed by us for this purpose which are essentially replica of various e-forms. He shall also obtain copies of all necessary documents as per the checklist associated with each e-form.

The information so collected alongwith the documents shall be forwarded to our expert who after checking the same shall initiate the process of Incorporation in a step-wise manner. He will first get DSC and DPIN issued for the designated partners as required which will take 2-3 days. Thereafter he will apply for reservation of a name for the proposed LLP in Form 1 and shall simultaneously prepare an LLP Agreement mentioning the terms. After the name gets reserved and you send your approval pertaining to LLP Agreement, the expert shall file form 2 for Incorporation under prior intimation to you so that he may contact you for want of any information/clarification from your side.

After submission of Form-2, he shall regularly check its status and shall furnish you the certificate of Incorporation as soon as the same gets processed. The entire process takes about 25-30 working days under normal business conditions.

Why Filing Door Stands Out ?

 

   Strong team of qualified experts – Our strength in matters related to Incorporation of a Private Limited Company is attributed to our team of highly qualified and experienced working professionals from different disciplines, including legal experts, Chartered Accountants, Company Secretaries, Document Writers etc. who work in tandem with each other and are assisted by junior officers.

 

⇒  Smooth and seamless interaction – We endure to provide our best services in all matters relating to Incorporation of Private Limited Company, by ensuring smooth and seamless interaction with you preferably through digital communication mode to save your time and efforts.

 

⇒  The entire process is digitized – We have digitized the entire process of Incorporation of Private Limited Company using a dedicated software comprising a comprehensive checklist to ensure that all the obligations are fulfilled at each stage within the prescribed due time. Using this software, we are able to provide end to end services on all aspects relating to Incorporation of a Private Limited Company in a systematic manner. We also have specially designed data-entry forms which are essentially replicas of various e-forms prescribed for Incorporation of a Private Limited Company and shall be shared with you online for filling in the desired details under assistance from our team.

 

⇒  Regular Updating – The names and contact details of all our esteemed clients are preserved in a database which enables us to send them updates on new policies and regulations whenever they are announced, through SMS/WhatsApp/E-mail entirely free of cost.

 

 ⇒  Total Business Solution – We provide service assistance in each and every aspect of doing business whether in relation to its establishment or its working as well as undertake to provide total business solution on turnkey basis.     

 

    FilingDoor is India’s most trusted technology-driven legal advisory and tax filing platform that ensures a smooth transition of accounting operations for startups and established businesses. Found in the year 2017, FilingDoor is based in Delhi and has successfully assisted 5000+ clients till now. Some of our core services include government registrations & filings, accounting, documentation, and annual compliances. We aim to offer hassle-free legal consultancy and tax-related services to individuals and businesses.

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