Limited Liability Partnership
Limited Liability Partnership (LLP) was introduced in 2009 in India and became a very popular type of business throughout the world. All LLP is governed under the Limited Liability Partnership Act, 2008.
An LLP is a combination of both partnership and a company. It has all basic features of a partnership firm, except the legal entity status and unlimited liability of partners. It also has legal existence and identity, separate from its partners.
An LLP is liable to the extent of all of its assets, and liability of all its partners is limited to their agreed contribution in the LLP.
As per section 2 (1) (n) of the Limited Liability Partnership Act, 2008, a “limited liability partnership” means a partnership formed and registered under this act.
As per section 2 (1) (o) of the Limited Liability Partnership Act, 2008, a “limited liability partnership agreement” means any written agreement between the partners of the limited liability partnership or between the limited liability partnership and its partners, which determines the mutual rights and duties of the partners, and their rights and duties in relation to that limited liability partnership.
WHY INCORPORATE AN LLP?
- Less documentation
- No minimum contribution required
- Lower incorporation cost
- Less compliances
- Easy winding up
PROCESS OF INCORPORATION OF AN LLP
The Ministry of Corporate Affairs (MCA) has introduced re-engineering of LLP incorporation forms on 18th September 2018 and made them effective from 2nd October 2018. The process is as follows:
- Obtain Digital Signature Certificate (DSC) for the proposed designated partners(s): First of all, the basic requirement to incorporate an LLP is having a DSC as all the filings to the Registrar of Companies are made through an online application system which is appended with a valid DSC.
Obtain Director Identification Number (DIN) for the proposed designated partners(s): DIN is a unique director identification number allotted by the Central Government to any person intending to be a designated partner of an LLP.
- Select suitable LLP name and make an application for availability of name: The name of an LLP shall end with the word ‘LLP’ and the proposed LLP name shall comply with the Name Availability Rules and Guidelines. After the introduction of new process, the name shall be reserved through Reserve Unique Name – Limited Liability Partnership (RUN-LLP).
- Capital requirement: There is no minimum capital requirement for registering an LLP.
- Registered office: Principal place of business of the proposed LLP from where it can control its operations.
- Documentation & Filling: Documents, such as consent, declaration, etc., need to be drafted, signed and filed electronically, along with the fees applicable.
- Certificate of Incorporation: After scrutiny, the Central Registration Centre (CRC) issues a Certificate of Incorporation.
LLP Agreement: After the incorporation of an LLP, an LLP agreement need to be drafted and filed with the Registrar within 30 days from the date of incorporation.
Generally, it takes 7-10 days from the date of application to get the Certificate of Incorporation from CRC.
- For the formation of an LLP, there should be two minimum partners and designated partners. Designated partners shall also be accountable for regulatory and legal compliances, besides their liability as partners, per-se.
- A body corporate can be a partner of LLP.