Overview of LLP?
LLP is an alternative corporate business form that it gives the benefits of limited liability of a company and the flexibility of a partnership. Thus LLP is a hybrid form of Company and 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.
Limited Liability Partnership is a body corporate formed and incorporated under the LLP Act, 2008.
Two or more persons associated for carrying on a lawful business with a view to earnings profits.
Minimum two designated partners are required to incorporate an LLP and there is no limit on maximum number of designated partners/partners in LLP.
First LLP in India “HANDOO & HANDOO LEGAL CONSULTANTS LLP” was registered on 2nd April 2009.
Partnership Act,1932 is not applicable on LLP.
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Basic Requirements for Formation of LLP:
1. Minimum 2 Individual Designated Partners are required, one of them should be resident in India;
2. The LLP must carry on a lawful business;
3. The Motive of LLP formation must be earning profits; Thus Non Profit Organizations cannot be incorporated in LLP format;
4. LLP must have a unique name;
5. LLP must have registered office.
Salient Features of LLPs:
1. Liability of Partners of LLP is limited;
2. Perpetual Succession;
3. No limit on maximum Number of Partners;
4. No Partner is liable for independent or un-authorized acts of other partners;
5. There is no restriction on entering into any contracts with related parties;
6. No mandatory statutory meetings & their compliances, except provided in LLP Agreement;
7. Simplified Compliances;
8. No restrictions on salaries, compensations, distribution of profits to partners.
Who Can Prefer LLP?
1. LLPs are best business model for Joint Venture entities;
2. Professional Firms (CA/CS/CWA);
3. Entities engaged in Service Sector/Real Estate;
4. All partnerships with long term objective.
Who Can Not go for LLP?
1. Non profit-making entities;
2. Finance/ Investment entities;
Comparison of LLP With Partnership Firms and Company:
| Particulars | Partnership Firm | LLP | Company |
| Compliance Level |
Low |
Moderate |
High |
| Dividend
Distribution Tax |
Not Applicable |
Not Applicable |
Applicable |
| NBFC Activities |
Not Eligible |
Not Eligible |
Eligible |
| Prevailing Act |
Partnership Act, 1932 |
LLP Act, 2008 |
|
| Registration Requirements |
Optional |
Registration is mandatory under the provisions of LLP Act, 2008 |
Registration is mandatory under the provisions of Companies Act, 2013 |
| Perpetual Succession |
It does not have Perpetual Succession |
It has Perpetual Succession |
It has Perpetual Succession |
| Charter Document |
Partnership Deed |
LLP Agreement |
MOA & AOA |
| Separate Legal Entity |
Not a separate Legal Entity |
It is a separate legal entity distinct from its partners |
It is a separate legal entity distinct from its members |
| Creation |
Partnership is a creation by contract or Agreement between two or more partners |
LLP is created by Law |
Company is created by Law |
| Statutory Meetings |
The is no provisions for holding of Statutory Meetings in Partnership Act, 1932 |
The is no provisions for holding of Statutory Meetings in LLP Act, 2008 |
Companies Act, 2013 have provisions regarding holding of Statutory Meetings |
| Annual Filing |
No return is required to be filed with Registrar of Firms |
Annual Filing is Mandatory |
Annual Filing is Mandatory |
| Statutory Audit |
Not Applicable |
Applicable only if
|
Mandatory |
Procedure for Incorporation of LLP
STEP 1: Apply for DPIN (DIN) of Designated Partners:
First requirement of incorporation is to Obtain DPIN (DIN) for all the Designated Partners. However if there shall be only 2 Designated Partners in the proposed LLP then DIN shall be allotted them by Fillip form itself.
STEP 2: Apply for DSC (Digital Signature Certificate):
Getting DSC of any one Designated Partners for digital authentication of the Incorporation form. Fillip Form shall be digitally signed by any one designated partner.
STEP 3: Apply for Name Reservation:
File form RUN LLP for reservation of name of the proposed LLP. Addition of the word LLP or Limited Liability Partnership at the end is allowed with the name of proposed LLP.
STEP 4: Filing of Form Fillip:
After approval of name of proposed LLP, file Form Fillip for incorporation of LLP following information shall be given in form Fillip:
1. Name of LLP;
2. Full address of Registered Office;
3. Main Objects of the LLP;
4. Name of the office of Registrar in which the proposed LLP is to be registered;
5. Based on business activities, main division of industrial activity of the LLP as per NIC-2004;
6. Total Number of Designated Partners and/or Partners;
7. Details of designated partners and/or partners such as their name, Father`s name, Date of Birth, Mobile & Telephone No, E-mail address, present and permanent address, educational qualification, place of birth, duration of stay at present address, PAN card Number, Passport/Aadhar/DL/Passport Number;
8. Monetary Value of contribution (in Rs.) by each Partner/Designated Partner;
9. Interest of Partners/Designated Partners in other Entities;
10. Total monetary value of contribution in the LLP;
11. Statement by a CS/ Advocate / CA/ CMA in practice that all the requirements of the LLP Act, 2008 and the rules made thereunder have been complied with, in respect of incorporation.
Attachments of Fillip Form:
- Subscribers Sheet including Consent;
- Interest of designated partner and/or partners in other entities;
- ID proof of all designated partners and/or partners (viz. Aadhar Card/Voter ID/Passport/Driving Licenses, any one)
- Address Proof of all designated partners and/or partners (Viz Bank Statements/Electricity Bill/Telephone Bill/Mobile Bill, any one);
- Pan Card of all designated partners and/or Partners;
- Utility Bill of the premises where registered office of the LLP is to be situated;
- NOC from the owner of the premises where registered office of the LLP is to be situated;
However if all or any of Designated Partner(s)/Partner(s) have DPIN (DIN) then Copy of ID Proofs, Address Proofs and Pan Card is not required to be attached in Fillip Form.
STEP 5: Approval/Sent for Re-submission by the Registrar:
The Registrar, on satisfying that it has complied with the provision the LLP Act, 2008 and rules made thereunder for incorporation, He shall subject to the provisions of the LLP Act and the rules made there under, register the documents submitted and issue a Certificate of Incorporation.
However if the registrar has a reasonable ground to believe that the documents filed are not proper or he requires some additional documents/information then he can ask the applicant for the same by sending form for re-submission. In such a case the applicant shall fulfil the documents/information required by the Registrar, Thereafter on satisfying the Registrar with re-submitted Fillip form, shall issue Certificate of Incorporation.
STEP 6: Preparation, Execution and filing of form LLP-3 (LLP Agreement):
- Stamp Duty shall be paid on the LLP Agreement, such stamp duty may differ state to state;
- LLP agreement shall be duly executed/signed by all the designated partners and/or partners of the LLP and witnessed by two witnesses;
- Form LLP 3 shall be filed with Registrar within 30 days from the date of incorporation of LLP. There shall be only one attachment in form LLP-3 viz. LLP Agreement.
STEP 7: APPLY FOR PAN CARD NUMBER OF THE LLP:
Form 49A for allotment of Pan Card Number of LLP shall be filed.
FAQs on LLP Incorporation
Q.1 What is minimum number of designated partners required to incorporate a Limited Liability Partnership?
Answer: Minimum 2 designated partners required to incorporate an LLP, out of whom one should be resident in India.
Q.2 Is it allowed to use to virtual office address to register LLP?
Answer: Virtual Office address is not allowed to register LLP.
Q.3 What is the difference between partner and designated partner?
Answer: The Designated Partners are responsible towards the day to day functioning of LLP while the partners are only investors.
In simple words Designated partner are like Directors and partners are like shareholders of a company.
Q.4 Can all the designated partners of LLP be foreign residents?
Answer: No, at least one designated partner of LLP should be resident in India.
Q.5 Can an existing partnership firm be converted into LLP?
Answer: Yes, an existing partnership firm can be converted into LLP by complying with the provisions of Section 55, Schedule 2 of LLP Act, 2008 and Rule 38 of LLP Rules, 2009.
Q.6 Can an existing Private Company be converted into LLP?
Answer: Yes, an existing Private Company can be converted into LLP by complying with the provisions of Section 56, Schedule 3 of LLP Act, 2008 and Rule 39 of LLP Rules, 2009.
Q.7 Can an existing Unlisted Public Company be converted into LLP?
Answer: Yes, an existing Unlisted Public Company can be converted into LLP by complying with the provisions of Section 57, Schedule 4 of LLP Act, 2008 and Rule 40 of LLP Rules, 2009.
Q.8 Can a Listed Company be converted into LLP?
Answer: Listed company cannot be converted into LLP.
Q.9 What is the validity of an approved name?
Answer: An approved name is valid for 90 Days from the date of approval.
Q.10 Is it mandatory to file LLP Agreement?
Answer: Yes LLP agreement is required to filed within 30 days from the date of incorporation of LLP. Failing to which Rs 100 penalty for each day shall be charged.
Q.11 What is the maximum penalty on delay filing of Form LLP-3?
Answer: No maximum penalty is mentioned in LLP Act, 2008 on delay filing of form LLP-3. However Rs 100/- per day after the expiry of 30 days from the date of incorporation of LLP, till the date of filing shall be charged. Therefore it is pertinent to file the said form as soon as possible.
Q.12 Can professionals with different streams incorporate LLP?
Answer: Yes, professional of different streams like CS, CA, Advocates, Engineers, Doctors etc. can incorporate LLP.
Q.13 What is the maximum stamp duty on LLP Agreement?
Answer: Stamp Duty on LLP Agreement depends on state of incorporation of LLP and Capital Contribution of LLP.
Q.14 Is Statutory Audit of LLP mandatory?
Answer: Statutory Audit of LLP is not mandatory, However Statutory Audit of LLP shall be mandatory only if:
- Capital Contribution of LLP exceeds Rs 25 Lakh; or
- Turnover of LLP exceeds Rs 40 Lakh.
Q.15 Can LLP with motive of welfare of Society be incorporated?
Answer: The motive of formation of LLP shall be earning of Profits, Therefore LLP with objects of welfare of society cannot be incorporated.
Q.16 Can LLP with objects of Finance/NBFC/Investments be formed?
Answer: Objects related to Finance/NBFC/Investments not allowed to LLPs.
Q.17 How many maximum partners/designated partners can be there in LLP?
Answer: There is no limit on maximum number of designated partners/partners in LLP.
Q.18 Whether Provisions of Indian Partnership Act, 1932 are applicable on LLPs?
Answer: No Provisions of Indian Partnership Act, 1932 are not applicable on LLPs.
Q.19 What are the qualifications of an Individual for becoming Partner?
Answer: There are no qualifications of Individuals are mentioned in LLP Act, 2008 for becoming partner/designated partner in LLP. However an individual shall not be eligible to become partner/designated partner of LLP, if:
- He has been found of Unsound mind by a court of competent jurisdiction;
- He has been undischarged insolvent;
- He has applied to be adjudicated as an insolvent and his application is pending.
Q.20 Can body corporates form an LLP by becoming designated partners/partners of LLP?
Answer: The basic requirement of formation of LLP is that there should be at least two individual designated partners and at least out of which one should be resident in India. If all designated partners of LLP are body corporates then their authorized signatories should be individuals and at least one out of them should be resident in India in the previous financial year.
Q.21 Whether Foreign Nationals can incorporate LLP in India?
Answer: Yes, LLP Act, 2008 allows the foreign nationals to incorporate LLPs in India. Provided that at least one designated partner should be resident in India.
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