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An LLP or Limited Liability Partnership is a business structure more preferred than a general partnership as it ensures limited liability of the partners. It was introduced in 2008 and is governed by The Limited Liability partnership Act, 2008.
The liability of each partner is limited to the capital he/she has contributed. It has all the features of ease and flexibility of a general partnership and provides an improvement in the form of limited liability.
An LLP Agreement must be executed between the partners detailing the name of the LLP, business to be conducted, names and details of each partner along with intimation of who are the designated partners, the profit and loss sharing ratio and retirement and induction process for partners etc.
An LLP must have at least two partners and there is no ceiling on the maximum. One of the partners of the business must be a resident of India. There is no minimum capital required in private limited company and Rs.5 Lakhs in case of a public limited company.
In an LLP, “Designated partners” will be selected and as such they will be responsible for the day to day management of the LLP and will be key in monitoring the business and filing annual returns and compliances with various government authorities.
An LLP registration process is very similar to that of incorporating a private limited company but with minor differences.
Step 1- Applying for DSC (the digital signature certificate for designated partners for the purpose of signing the electronic documents while registering online. It is advisable to get a Class 2 or 3 DSC.)
Step 2- Apply for DIN (the Director Identification Number for the designated partners in Form DIR-3. After that eForm 1 is applied for reservation of name of LLP with the MCA (Ministry of Corporate Affairs). It is advised that you make a preliminary check for availability of the desired name at the dedicated search link on the MCA portal)
Step 3- Submitting the eform 2 with requisite fees for the incorporation
Step 4- the final step i.e. post incorporation which is filing the LLP agreement within 30 days from date of incorporation, (Apply for PAN/TAN with the NSDL (National Securities Depository Limited) and with that open bank accounts in your business name and operate your business.)
FAQs On LLP Registration
1. What is LLP?
LLP is defined as partnership formed and registered under Limited Liability Partnership Act is an alternative corporate business form that gives the benefits of limited liability of a company and the flexibility of a partnership. The LLP can continue its existence irrespective of changes in partners. It is capable of entering into contracts and holding property in its own name. The LLP is a separate legal entity, is liable to the full extent of its assets but liability of the partners is limited to their agreed contribution in the LLP. Further, no partner is liable on account of the independent or un-authorized actions of other partners, thus individual partners are shielded from joint liability created by another partner’s wrongful business decisions or misconduct.
2. Who can be a “Designated Partner”?
Every LLP shall be required to have at least two Designated Partners who shall be individuals and at least one of the Designated Partner shall be a resident of India.
In case of a LLP in which all the partners are bodies corporate or in which one or more partners are individuals and bodies corporate, at least two individuals who are partners of such LLP or nominees of such bodies corporate shall act as designated partners.
3. Whether there would be any requirement of ‘identification number’ of Designated Partner?
Every Designated Partner would be required to obtain a “Designated Partner’s Identification Number” (DPIN) on the lines similar to “Director’s Identification Number” (DIN) required in case of directors of companies apply for application of DPIN as provided in Form 7.
4. How can a person become partner of an LLP?
Persons, who subscribed to the “Incorporation Document” at the time of incorporation of LLP, shall be partners of LLP. Subsequent to incorporation, new partners can be admitted in the LLP as per conditions and requirements of LLP Agreement.
5. How can an existing partner cease to be a partner of an LLP?
A person may cease to be a partner in accordance with the agreement or in the absence of agreement, by giving 30 days notice to the other partners. Notice is required to be given to ROC when a person becomes or ceases to be partner or for any change in partners.
6. What are the compliances related to change in partner?
There is any change in Partner and DP (admission, resignation, cessation, death, expulsion) should be filed e- form 4 within 30 days of change with fees. And also Supplementary LLP Agreement to be filed e- form 3 with ROC within 30 days with fees given the alteration in mutual rights and duties of partners and Form 4 shall include a statement signed by the incoming partner that he consents to become a partner.
7. Whether LLP can be converted?
As per Chapter XXI of Companies Act 2013 i.e. Section 366 states the provisions of Companies capable of being registered.
Section 366 (1) states that LLP can be registered as Company with certain conditions specific to LLP. Section 366 (2) shall contain seven or more members and Section 366 (2)(ii) says cannot be converted into Limited by Guarantee and Unlimited Company i.e. can be converted into Companies Limited by shares.
8. What is the penalty for false representation of statement or any document?
If in any return, statement or other document required by or for the purposes of any of the provisions of LLP Act, any person makes a statement-
(a) which is false in any material particular, knowing it to be false; or
(b) which omits any material fact knowing it to be material, he shall, save as otherwise expressly provided in this Act, be punishable with imprisonment for a term which may extend to two years, and shall also be liable to fine which may extend to five lakh rupees but which shall not be less than one lakh rupees.
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Please note that Clidel Services private limited is platform for facilitating services through reliable professionals. The information on this website is for the purpose of knowledge only and should not be relied upon as legal advice or opinion.
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