INTRODUCTION:
A limited liability partnership is a body corporate formed and incorporated under Limited Liability Partnership Act, 2008 and is a legal entity separate from that of its partners.
LLP is a Partnership Firm established with Minimum 2 Partners (any individual or body corporate may be a partner in a limited liability partnership) who enters into a LLP Agreement. However, there is no upper limit on the maximum no. of Partners of a LLP and any change in the partners of a limited liability partnership shall not affect the existence, rights or liabilities of the limited liability partnership.
Amongst Partners of LLP, every limited liability partnership shall have at least two designated partners who are individuals and at least one of them shall be a resident in India (As per latest amendment atleast one partner should have lived in India for not less than 120 days during the financial year is also entitled to become designated partner of the LLP).
• Designated Partners are responsible for the Compliance of the LLP.
• An individual shall not become a Designated Partner unless he gives his prior consent to act as such to the limited liability partnership in Form 9.
• The rights and duties of designated partners are governed by the LLP agreement.
• Every designated partner shall obtain a Designated Partners Identification Number
The LLP has perpetual succession just like a company and the partners of an LLP have limited liability.
KEY FEATURES OF LLPS:
1. Limited Liability: Partners’ liability is limited to their agreed contributions, safeguarding personal assets.
2. Separate Legal Entity: LLPs have distinct legal identities, enabling perpetual succession and ease of ownership transfer.
3. Flexible Management: LLPs offer management flexibility and streamlined decision-making processes.
4. Tax Benefits: LLPs are taxed like partnerships, with profits passing through to partners and no entity-level taxation.
STEPS FOR INORPORATION:
1. SELECT PARTNERS AND DESIGNATED PARTNERS, OBTAIN THE DIGITAL SIGNATURE CERTIFICATE (DSC’s) AND DESIGNATED PARTNERS IDENTIFICATION NUMBER (DPIN’s): –
• LLPs require a minimum of two partners, with at least two designated as Designated Partners who are responsible for compliance of LLP.
• Partner/Designated partner of proposed LLP, whose signatures are to be affixed on the e-forms have to obtain class 2 and class 3 Digital Signature Certificate (DSC) from any authorized certifying agency.
• Individuals required to be appointed as Designated Partners need to have DPIN or DIN, and Application for the allotment of the DPIN can be made in Form Fillip.
– Provided that application for the allotment of DPIN shall not be made by more than 5 individuals in Form Fillip.
2. NAME RESERVATION: –
• Choose a unique LLP name and verify its availability through name search facility on MCA portal.
• Application for name reservation shall be made through RUN-LLP (Reserve Unique Name- Limited Liability Partnership) available on MCA V3 Portal.
• Re-submission of such application is allowed within Fifteen days for the rectification of defects.
• Such reserved name shall be available for a period of three months from the date of intimation by the Registrar.
3. DRAFT LLP AGREEMENT: –
• Prepare an LLP agreement detailing roles, responsibilities, profit-sharing, and other terms among partners. This agreement must be filed with the Registrar of Companies.
• Every limited liability partnership shall file information with regard to the limited liability partnership agreement in Form 3 with the Registrar within thirty days of the date of incorporation.
4. THE INCORPORATION DOCUMENT SHALL CLEARLY STATE THE:
• Name of the limited liability partnership;
• proposed business of the limited liability partnership;
• Registered Office Address of the limited liability partnership;
• Name and address of each person who is to become Partner/Designated Partner of the limited liability partnership on incorporation;
5. REGISTER WITH REGISTRAR OF COMPANIES: –
• The incorporation document shall be filed in Form FiLLiP with the Registrar having jurisdiction over the State in which the registered office of the limited liability partnership is to be situated.
• Application for Reservation of Name may be made through Form FiLLiP too, However, if the application for reservation of name is applied through RUN-LLP, which has been approved, then one may fill such reserved name as the proposed name of the LLP.
• Documents Required-
I. Proof of Office Address along with NOC, if applicable (Conveyance deed, Lease deed, Rent Agreement along with rent receipts)
II. Copy of Utility Bills (not older than 2 months)
III. Documents required in case of Individual Designated Partners/Individual Partners –
i. Income Tax PAN/ Passport Number details
ii. Copy of Identity Proof of Partners (Voters Identity card/ Passport /Driving License/Aadhar Card)
iii. Copy of Residential Proof of Partners (Bank Statement/ Electricity Bill/ Mobile Bill/ Utility Bill/ Regd. Notarized Rent Agreement)
iv. Passport size photograph
v. Valuation Certificate is Mandatory to be attached by user in case option “Other than cash ‘ is selected in field ‘Form of contribution’
vi. Subscribers’ sheet including consent.
COMPLIANCE REQUIREMENTS:
1. Annual filings such as Annual Return (Form 11) and Statement of Accounts (Form 8) are mandatory.
2. Maintain proper accounting records and prepare financial statements in accordance with applicable standards.
3. Adhere to tax regulations, including GST and Income Tax filings.
4. Audit by CA only if contribution exceeds Rs. 25 Lakhs or Turnover exceed Rs. 40 Lakhs.
5. Certificate by Company Secretary only if contribution exceeds Rs. 50 Lakhs or Turnover exceeds Rs. 5 crores.
CONCLUSION:
Incorporating an LLP provides a robust legal framework suitable for businesses seeking liability protection and operational flexibility. By following prescribed procedures and compliance requirements, LLPs can take advantage of a corporate structure while maintaining partnership values. This makes LLPs an attractive choice for SMEs, professional firms, and startups aiming to mitigate risks and foster sustainable growth.
For any further consultation or enquiry, write to us at jkg@jkgupta.com