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 as against the case of Rs.1 lakh 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. The first step is to apply for DSC (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.
The second step is to apply for DIN (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.
The third step is the incorporation of the LLP by submitting eForm 2 with requisite fees. The final step post incorporation 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.