Limited Liability Partnership Act 2008 – A Brief Note

The Parliament of India enacted the Limited Liability Partnership (LLP) Act, 2008 to introduce a special corporate business vehicle to be known as LLP that allows its members to have the flexibility of organising their internal structure as a partnership and also provides the benefits of limited liability as availed by Companies.

Limited Liability Partnership is a hybrid form of structure where features of partnership and the companies are combined together, and members can avail the benefit of limited liability while at the same time having the flexibility of organizing their internal management on the basis of a mutually-arrived agreement, as is the case in a partnership firm. This form of structure before it was introduced in India was prevalent in other countries such as United States (US), United Kingdom etc. Texas (one of the states of US) was the first amongst all to introduce the concept of LLP.

OBJECTIVES OF LLP

LLP are a flexible legal and tax entity that allows partners to benefit from economies of scale by working together while also reducing their liability for the actions of other partners. In some professions, however, you need something a little more customized than a limited liability company with a set structure. Enter the limited liability partnership. The LLP is a formal structure that requires a written partnership agreement and usually comes with annual reporting requirements depending on your legal jurisdiction. IN SHORT LLP IS MORE FORMAL THAN PARTNERSHIP FIRM AND YOU HAVE TO FULLFILL LESS FORMALITIES THAN PRIVATE COMPANIES.

ADVANTAGES OF LLP

• In an LLP, one partner is not answerable or liable for another partner’s misconduct or negligence.
• The partners of an LLP have the right to manage the business directly.
• An LLP provides limited liability protection for the owners.
• If the number of Partners reduces less than 2, the sole partner can still find a new Partner to fill the position.
• Post incorporation, an LLP can have limitless partners.
• If there is only one partner in an LLP, there is time to find a new one, without dissolution of the LLP.
• It is a separate legal entity.
•  LLPs have assets and liabilities that are separate from that of the promoters.
•  An LLP can raise funds from Partners, Banks and NBFCs.

All LLPs registered in India with the Ministry of Corporate Affairs (MCA) need Statement of Accounts and Annual Returns on each Financial Year. Though the LLP has done business or achieved profit, it is mandatory for an LLP to file a return. There is three compulsory compliance when you own an LLP.

PROCEDURES OF REGISTRATION OF LLP

Name of the LLP: –

• The Name of proposed LLP shall be determined.
• The name of proposed LLP shall have words LLP or Limited Liability Partnership as last words of its name.
• The name of the proposed LLP shall not be undesirable or identical or too nearly resembles to that of any other LLP or partnership firm or any other body corporate.
• The name of the LLP can be checked on MCA portal, if an LLP or a Company of such name is already registered or not.
• The name of the proposed LLP shall not be identical to a registered trade mark or a trade mark for which an application of registration has been filed under Trade Marks Act, 1999 by any other person.
• The significance of abbreviated or coined word in the proposed name shall be specified.
• In case, there is any vernacular language(s) is used in the proposed name, then it should be mentioned.

Details of proposed LLP: –

• The address of registered office of the proposed LLP.
• Address proof of the registered office.
• Details of the owner of the property.
• No Objection Certificate (NOC) of the owner of the property.
• If such property is taken on lease or rent, then lease agreement or rent agreement of such property.
•  Contact Details of LLP.
• Email address of the LLP.

Business of proposed LLP: –

• The business activity to be carried out by the LLP shall be determined.
• The code of business activity to be carried out by the LLP as per NIC 2004** shall be determined.
• The main object of the LLP shall be drafted.
• The business of an LLP cannot include activities related to purchase or sell of stocks and commodities or related activity.

**National Industrial Classification – A standard industrial classification is essential for developing a proper statistical system in any country.

Partners of proposed LLP: –

1. The proposed LLP should have atleast two Designated partners.

2. A person can be considered to be an ineligible candidate to become a partner if such person

• is of unsound mind
• is an undischarged insolvent
• Has applied for insolvency and such application is pending.

3. PAN/ Passport No. / DIN/ DPIN of each partner.

4. Name, Address, Qualification, Occupation, Date of Birth, Phone Number, Email Address of such partner.

5. Details of amount of contribution and mode of contribution by all partners.

6. No. of LLPs in which he/she is a partner.

7. No. of Companies in which he/she is a director.

8. In case, Partner is a body corporate is a partner then the following are required: –

i. Type of Body corporate

ii. CIN/ FCRN/ LLPIN/ FLLPIN or any other identification number

iii. Name, Country, Address, Phone Number, Email address, Country of registration

iv. Details of amount of contribution and mode of contribution.

v. Name, Nationality, Address, Qualification, Occupation, Date of Birth, Phone Number, Email Address of nominee of such body corporate.

vi. Pan/ Passport no./ DPIN of such nominee.

vii. Designation or Authority of such nominee in the body corporate.

Designated Partners of LLP: –

• LLPs has to appoint Designated Partners who shall be responsible for doing all the acts, matters and things of the LLP for compliance of provisions including filing of any document, return, statement and report pursuant to the LLP Act and LLP Agreement.
• The proposed LLP should appoint atleast two partners as Designated Partners.
• In case all the partners are body corporate then atleast two nominees of such body corporate shall act as designated partners.
• In case one or more partners are individuals or body corporate then atleast two individuals or nominee of such body corporate shall act as designated partners.
• The Designated Partners shall give consent to be appointed as Designated Partners and such consent shall be submitted to the registrar within 30 days from his appointment.
•  Name, Address, Qualification, Occupation, Date of Birth, Place of Birth, Phone Number, Email Address of such Designated Partners.
• Duration of stay at the given address. In case the stay is less than one year, then the address of previous residence.
• The proposed LLP should appoint atleast two partners as Designated Partners.
• Proof of Identity: –

i. Voters ID Card

ii. Passport

iii. Driving license

• Residential proof: –

i. Bank Statement

ii. Electricity Bill

iii. Telephone Bill

iv. Mobile Bill

• Details of amount of contribution and mode of contribution by all Designated Partners.
• No. of LLPs in which he/she is a partner.
• No. of Companies in which he/she is a director.
• Digital Signature Certificate (DSC) of anyone Designated Partner.
•  Designated Partner Identification Number (DPIN), if already registered as a Designated Partner.

Reservation of Name

1) Open MCA portal, www.mca.gov.in.

2) Login into the portal.

3) Open MCA services.

4) Select RUN-LLP (Reserve Unique Name for Limited Liability Partnership)

5) Select New Incorporation/ Conversion of firm to LLP/ Conversion of Unlisted Public Company or Private Company to LLP, as applicable.

6) Maximum Two proposed names could be entered on the basis of priority.

7) The applicant can use Auto check facility for primary checking of identical name.

8) The applicant can also enter comments which can include Objective of the proposed LLP or any other comment as deems fit.

9) The applicant can attach any document in PDF format as required.

10) The applicant can attach any approval taken from regulatory authority, if required.

11) Then the application is to be submitted and the payment of fees of Rs. 200/- as per Registered Office Rules which can be changed from time to time.

If there is any query or non-availability of name due to resemblance than such would be intimated by Central Registration Centre (CRC). The applicant can resubmit the application by answering the queries.

If the proposed name is available without any query or objection, then Central Registration Centre (CRC) would intimate and reserve such name for 20 days from the date of approval of name.

Preparation of Details and Documents

The following details and documents shall be prepared before filing form for incorporation of the LLP.

1) Main Objective

2) Proof of Office Address (In case of Utility Bill, it should not be older than 2 months).

3) NOC from the owner of the property

4) Details of Partners/ Designated Partners as mentioned above

5) Proof of Identity of each Designated Partners as mentioned above

6) Proof of residential address of each Designated Partners as mentioned above

7) DSC of Designated Partner

8) Details of LLPs / Companies in which Partner / Designated Partner is a Partner or Directors.

9) Copy of approval obtained from any regulatory authority, if required.

10) Subscribers sheet and Consent letter of each Partner/ Designated Partner.

**All the Documents should be self-attested.

Preparation of e-form FiLLiP

1) Download e-form FiLLiP from MCA portal.

2) If the applicant has reserved the name through RUN-LLP, then the SRN of the application is to be mentioned.

3) If the applicant has not reserved the name, then the name can be proposed in this form.

4) Select if it is a New Incorporation/ Conversion of firm to LLP/ Conversion of Unlisted Public Company or Private Company to LLP.

If such Incorporation is as a conversion of Private or Unlisted Public Company then CIN of such company is to be mentioned.

5) Fill the required details as per prepared documents including required attachments.

6) The details of Designated Partners / Partners as per documents prepared along with Amount of contribution and mode of contribution.

7) Mention details of AADHAR, if available.

8) The main object of the proposed LLP shall be attached.

9) In case if any partner is body corporate, them a board resolution of such body corporate for approval of being appointed to be a partner is to be attached.

10) Proof of Office address is also to be attached.

11) NOC of the property owner is to be attached.

12) Proof of identity and residence of each Designated Partners is to be attached.

13) Subscribers sheet and Consent letter should also be attached.

14) The approval of any regulatory authority, if required, should also be attached.

15) Details of LLPs / Companies in which Partner / Designated Partner is a Partner or Directors, if any, should also be attached.

16) NOC of owner of trademark, if any in resemblance should also be attached.

17) Board resolution of existing Company in case of conversion shall also be attached.

Note: – One of the Designated Partner shall verify the same and attach his DSC along with his PAN/ DIN/ DPIN.

Note: – A professional has to validate the form and attach his DSC along with his professional details.

Note: – All the attachments should be duly signed or self-attested.

Filing of e-form FiLLiP

The e-form FiLLiP shall be filed on the MCA portal and make payment of filing fees.

After filing the form, the application can be rejected on basis of query or objection which would be intimated to the applicant and

which can also be resolved, if possible and such application can be resubmitted.

Certificate of Incorporation

If there is no objection or query, then the Certificate of Incorporation would be issued in form LLP 16.

Preparation of LLP Agreement

After receiving Certificate of Incorporation, An LLP Agreement should be made between the Partners and Designated Partners of the LLP.

Such LLP Agreement should include:

• Name of the LLP
• Name and address of all Partners and Designated Partners
• Amount of contribution, Mode of contribution and interest on such contribution.
• Manner of additional contribution to be made by Partners / Designated Partners
• Profit / Loss Sharing Ratio
• Remuneration of Partners / Designated Partners
• Rights and Duties of Partners / Designated Partners
• Proposed Business of LLP
• Manner of Appointment, Removal and Resignation of Partners / Designated Partners
• Liabilities of Partners / Designated Partners
• Restrictions of Partners / Designated Partners
• Time period for LLP
• Any other point as it may deem fit.

Note: – The LLP Agreement should be duly signed by all the Partners and Designated Partners and the stamp duty shall be paid as per Stamp Act of State in which such LLP is registered.

Filing of e-form LLP 3

The LLP agreement between Partners and Designated Partners of the LLP shall be filed on MCA portal in e-form LLP 3 with payment of filing fees as may be prescribed.

The details required in form LLP 3 should be as per the LLP Agreement and the Agreement is to be attached with the form.

The e-form LLP 3 shall be filed within 30 days from obtaining Certificate of Incorporation.