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  • A Limited Liability Partnership (LLP) is a hybrid business structure that combines the flexibility of a partnership with the limited liability of a company. It allows partners to manage the business while protecting their personal assets from the firm’s debts and liabilities.

 

  • LLP is a Body of Corporate
  • Perpetual Succession
  • Separate Legal Entity
  • LLP Agreement
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Overview
Documents
Advantages
Procedure
FAQ'S

Features of Limited Liability Partnership

LLP is a Body of Corporate

As per Section 3 of the Limited Liability Partnership Act 2008 (LLP Act), an LLP is a corporate body established and registered under the Act. It exists as a distinct legal entity separate from its partners.

Perpetual Succession

Unlike a general partnership firm, a limited liability partnership has the advantage of perpetual succession. This means that even if one or more partners retire, become insolvent, suffer from mental incapacity, or pass away, the LLP can continue its operations. Additionally, the LLP has the capacity to enter into contracts and own property in its own name.

Separate Legal Entity

Similar to corporations or companies, an LLP is recognised as a separate legal entity. It holds full liability for its assets and obligations. Moreover, the individual partners’ liabilities are limited to their contributions to the LLP. As a result, the creditors of the LLP are not considered creditors of the individual partners.

LLP Agreement

The LLP Agreement is a contract agreed upon by all partners, outlining their rights and duties. Partners have the freedom to create the agreement according to their preferences. The Act will govern their mutual rights and duties if they don’t create one.

Artificial Legal Person

For legal purposes, an LLP is considered an artificial legal person. It is created through a legal process and possesses all the rights of an individual. It exists as an intangible, immortal entity but is not fictional since it has real existence.

 

Common Seal

An LLP may have a common seal if the partners use one (Section 14(c)). However, having a seal is not mandatory. If they choose to use a seal, it must be kept under the custody of a responsible official. The seal can only be affixed by at least two designated partners.

Limited Liability

Under Section 26 of the Act, each partner is an agent of the LLP for its business activities. However, a partner is not an agent of other partners. The liability of each partner is limited to their agreed contribution to the LLP, providing personal liability protection to all partners.

Minimum and Maximum Number of Partners

Every LLP must have a minimum of two partners, and at least two of them must be individuals serving as designated partners. At least one designated partner should always be a resident of India. There is no maximum limit on the number of partners in the LLP.

Business Management and Structure

The partners of the LLP have the authority to manage the business. However, only the designated partners are responsible for ensuring legal compliance.

Business for Profit Only

LLPs are specifically formed to conduct lawful business to earn a profit. They cannot be established for charitable or non-profit purposes.

Investigation

The Central Government holds the power to investigate the affairs of an LLP. They can appoint a competent authority for this purpose.



Mutual Agency

Unlike a partnership firm, in an LLP, actions taken by one partner independently and without authorisation do not make other partners liable. Each partner is considered an agent of the LLP, and the actions of one partner do not bind the others.

 

  1. Advantages of Forming an LLP
  • Limited Liability Protection: Partners are not personally liable for the LLP’s debts and obligations.
  • Operational Flexibility: LLPs offer a flexible management structure where partners can define their roles and responsibilities.
  • Ease of Formation and Compliance: Forming an LLP is less complex than forming a private limited company, with fewer compliance requirements.
  • No Minimum Capital Requirement: There is no requirement for minimum capital contribution, allowing partners to contribute according to their capability.
  • Tax Benefits: LLPs may benefit from pass-through taxation, where profits are taxed as personal income to the partners, avoiding double taxation.



  1. Disadvantages of an LLP
  • Limited Growth Potential: LLPs may find it challenging to raise capital from investors compared to private limited companies.
  • Regulatory Compliance: While less stringent than corporations, LLPs still have certain compliance requirements, such as annual filings and audits.
  • Limited Recognition: In some jurisdictions, LLPs may not be as well-recognized or favoured as other business structures.

Pre-requisites for Incorporating an LLP

  • Minimum two partners allowed (Individual or body corporate)
  • At least two designated partners are required, with one being an Indian resident
  • A digital signature certificate needed
  • Mandatory to have an LLP name
  • An LLP agreement is essential
  • A registered office must be established.

LLP Registration Prerequisites and Eligibility Conditions

To qualify for the LLP company registration in India, you must adhere to the subsequent criteria:

  • Minimum of Two Partners: Establishing a Limited Liability Partnership in India necessitates a minimum of two partners, with no upper threshold on the maximum number of partners.
  • Designated Partners: Within the partnership framework, at least two selected partners are obligatory, and they must be natural individuals. At least one of these designated partners must also maintain residency in India.
  • Nomination for Body Corporate Partner If a body corporate assumes the role of a partner, the designation of a natural person must act as its representative.
  • Agreed Contribution: Each partner is required to contribute the shared capital of the LLP, as stipulated and agreed upon.
  • Minimum Authorized Capital: The LLP is mandated to possess an authorized capital of at least Rs.1 lakh.
  • Indian Resident Designated Partner: At least one designated partner of the LLP must hold a resident status in India.

By satisfying these prerequisites, you can progress with the LLP company registration in India and avail the advantages bestowed by this business structure.

 

Documents Required for LLP Registration

For Indian Nationals:

  1. PAN Card: Copy of the possible partners’ PAN cards.
  2. Identity Proof: Voter ID, Passport, Driver’s License, Aadhaar Card.
  3. Address Proof: Bank Statement, Electricity Bill, Telephone Bill, etc.
  4. Home Proof: Valid paper showing the present home location.

For Foreign Nationals:

  1. Passport: Mandatory proof of name, signed or apostilled.
  2. Address Proof: Driving License, Residence Card, Bank Statement, etc., signed or apostilled.
  3. Residential Proof: Document proving the present address, not older than one year.

For Registered Office:

  1. Proof of Registered Office Address: Recent energy bill in the company’s name, not older than 2 months.
  2. No Objection Certificate (NOC): Issued by the owner of the building property.
  3. Subscriber Sheet: Witnessed by a professional like a Lawyer, Chartered Accountant, or Company Secretary.

General Requirements:

  1. LLP Agreement: Governs rights and jobs among partners and the LLP.
  2. DPIN: Designated Partner Identification Number.
  3. DSC: Digital Signature Certificate for partners.
  4. Incorporation Documents: Forms like FiLLiP, Form 3, Form 8, etc.
  5. Annual Return: Form 11 for LLP.

Ensuring the filling of these papers, both for Indian and Foreign Nationals, along with the proper office-related paperwork, is important for an easy Limited Liability Partnership registration process.

 

  1. Steps to Form an LLP
  • Step 1: Choose a Name for Your LLP
    • Select a unique and relevant name for your LLP, ensuring it complies with naming guidelines (e.g., it should end with “LLP” or “Limited Liability Partnership”).
    • Check for name availability with the Registrar of Companies (ROC) or relevant authority.
  • Step 2: Draft the LLP Agreement
    • Contents: The LLP Agreement should outline the rights, duties, profit-sharing ratios, and responsibilities of each partner, as well as procedures for adding or removing partners.
    • Legal Review: It is advisable to have the agreement reviewed by a legal professional to ensure it meets all legal requirements and protects the interests of all partners.
  • Step 3: Register the LLP
    • Obtain Digital Signature Certificates (DSC): Partners must obtain DSCs for electronic filing of forms.
    • Apply for Director Identification Numbers (DIN): Partners must apply for DINs if they do not already have them.
    • File Incorporation Documents: Submit the incorporation form (such as Form FiLLiP in India) along with the LLP Agreement, address proof, and identity proof of partners to the ROC or relevant authority.
    • Obtain Certificate of Incorporation: Upon successful registration, the ROC will issue a Certificate of Incorporation, officially recognizing the LLP.
  • Step 4: Obtain Necessary Licenses and Permits
    • Depending on your business activities, apply for any required licenses or permits to operate legally.
  • Step 5: Register for Taxation
    • Tax Registration: Register for applicable taxes such as GST, VAT, or PAN (Permanent Account Number).
    • File Taxes: LLPs must file annual returns and maintain proper financial records. Partners must report their share of profits on their personal income tax returns.

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FAQ'S

Frequently Asked Questions

 A Limited Liability Partnership (LLP) is a business structure that combines elements of both partnerships and corporations. It provides the flexibility of a partnership while offering limited liability protection to its partners, meaning they are not personally liable for the debts or liabilities of the LLP.

In a traditional partnership, all partners are personally liable for the business’s debts and obligations. In an LLP, partners have limited liability, meaning they are not personally responsible for the LLP’s debts, and their personal assets are protected.

The main benefits of an LLP include limited liability protection for partners, flexibility in management and operations, and the ability to avoid double taxation, as LLPs typically pass their profits and losses through to the individual partners’ tax returns.

While both LLPs and corporations provide limited liability protection, LLPs are generally more flexible in terms of management and taxation. Corporations are subject to more stringent regulatory requirements and often face double taxation (once at the corporate level and again on dividends paid to shareholders), whereas LLPs typically do not.

LLPs are usually pass-through entities for tax purposes, meaning the LLP itself does not pay income tax. Instead, profits and losses are passed through to the individual partners, who report them on their personal tax returns.

Forming an LLP typically involves filing a registration or formation document with the relevant state or national authorities, creating a partnership agreement, and meeting any other regulatory requirements. The specific process and requirements can vary by jurisdiction.

 A partnership agreement is a document that outlines the roles, responsibilities, and rights of the partners in an LLP. It covers issues such as profit and loss distribution, decision-making processes, and procedures for adding or removing partners.

 In many jurisdictions, an LLP requires at least two partners. However, some places allow for a single-member LLP, which can be similar to a sole proprietorship with limited liability protection.

Yes, most jurisdictions require LLPs to file annual reports or statements of compliance. These reports often include updated information about the LLP’s management, address, and financial status.

Yes, foreign entities can form an LLP in many jurisdictions, but they may need to meet additional requirements or restrictions, such as appointing a local agent or complying with local regulations.

Ongoing compliance for an LLP typically includes maintaining proper records, filing annual reports, renewing licenses or permits, and adhering to any local, state, or national regulations that apply to the LLP’s business activities.

The departure of a partner may require amendments to the partnership agreement and possibly a re-registration of the LLP. The remaining partners will need to address how the departing partner’s share of the LLP’s assets and liabilities is handled.