Introduction: Limited Liability Partnerships (LLPs) have become a preferred legal entity, blending the benefits of a Private Limited Company and a Partnership Firm. In the pursuit of minimizing compliance while fostering a secure business environment, understanding the practical aspects of incorporating an LLP is crucial. From mandatory partners and distinct legal status to financial considerations, this article delves into the essentials, providing a comprehensive guide for entrepreneurs and businesses considering LLP formation.
1. It is mandatory to build a LLP there will be at least 2 individual Designated Partners, as same as company where two directors are required.
2. In LLP there are two or more Partners, they may be individual, body corporate as same as shareholders in the company.
3. Where in a company, Director has unique Director Identification Number (DIN), in case of LLP Designated Partner has Designated Partner Identification Number (DPIN). It will be same if any individual has DIN number that’s known as DPIN also.
4. 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.
1. One of the advantages of LLP is that the audit rule applies only when the below threshold limit cross. Following is the threshold provided under the rules for the audit of the accounts of an LLP:
2. For running the LLP there will be no requirement for filling any ROC form ie. Form ADT-1/ADT-3 to ROC respective for auditor appointment/resignation. Simply the Auditor appointed by the Designated Partners by specific resolution only within the prescribed time period as define in the LLP Act 2008.
3. There is no rule/procedure prescribed for the reappointment of the auditor. The old auditor will continue if no resolution for the new auditor is there in the partner’s /DP meeting.
4. The Auditor fees as per the LLP agreement and/or the mutual understanding between partners and auditor will prevail.
5. No need to file any form to start the business of the LLP such that in case of company form INC-20A for commencement of business mandatory to file after deposit the subscription money.
6. In LLP Partners are jointly liable to the extent of their contribution only and deposit the same just like share capital in company.
7. The LLP has also the quality of separate legal entity so eligible for all the benefits such as startup registration, MSME or Udyam Registration, Trademark Registration etc.
8. Meanwhile when the LLP business grow or expand and as per the business needs LLP can convert into Private Limited. Here Conversion makes only from LLP to private / unlisted public company.
As ease of doing business is the motive of today’s world the process of incorporation of LLP go through by Ministry of Corporate Affairs (MCA). After choosing the proposed name of LLP, deciding Designated Partner and Partners, contribution, Registered Office Details, objects etc. process will initiate.
In relation to LLP financial year means a period from 1st day of April of a year to the 31st day of March of the following year. Provided that if the LLP incorporated after 30th September of a year, the financial year may end on 31st day of March of the year next following that year.
Example: If LLP incorporated as on 1st October 2023, the LLP close first financial year either on coming 31st march or next 31st March 2025 ie LLP can file its first financial year for 18 months.
1. Form 8 Statement of Account & Solvency due date 30th October
2. Form 11 Annual Return of LLP, 60 days from the date of closing of financing accounts.
3. DIN KYC of Designated Partners
4. Other forms are required only for the event base task.
The charge details i.e. creation, modification or satisfaction of charge, can be filed through Appendix to eForm 8 LLP (Interim). However, it is required to file the charge details with the office of Registrar.
Minimum two DP required they shall be individual and at least one of them shall be resident in India further same minimum 2 partners are required. There is no limit for maximum number of partners in LLP.
Can a LLP issue shares to public?
No, a LLP not to issue shares in the share market.
Capital Contribution of LLP
A contribution of a partner may be tangible, movable or immovable or intangible property or incuding money, promissory notes, other way of contribute in cash or property, and contract of services performed or to be performed.
1. New concept introduces for small LLP as per LLP (Amendment) Act, 2021
The New concept introduce by LLP the Limited Liability Partnership (Amendment) Act, 2021
“small limited liability partnership” that means a limited liability partnership—the contribution of which, does not exceed 25 lakh rupees or such higher amount, not exceeding five crore rupees, as may be prescribed; and the turnover of which, as per the Statement of Accounts and Solvency for the immediately preceding financial year, does not exceed 40 lakh rupees or such higher amount, not exceeding 50 crore rupees, as may be prescribed; or
2. By Notification Ministry Of Corporate Affairs Notification New Delhi, on dated the 9th November, 2023 introduce new concept for
22A. Register of Partners
(1) Every limited liability partnership shall, from the date of its incorporation, maintain a Register of its partners in Form 4A which shall be kept at the registered office of the Limited Liability Partnership:
APPLICABILITY FOR EXISTING LLP Every LLP existing on the date of commencement of the said rules is required to maintain the Register of Partners in Form 4A within 30 days of commencement of the amendment rules.
22B. Declaration in respect of beneficial interest in any contribution. –
A person whose name is entered in the register of partners of a Limited Liability Partnership but does not hold any beneficial interest fully or partly in contribution (hereinafter referred to as “the registered partner”), such person shall file with the Limited Liability Partnership, a declaration to that effect in Form 4B within a period of thirty days from the date on which his name is entered in the register of partners specifying the name and other particulars of the person who actually holds any beneficial interest in such contributions:
Provided that where any change occurs in the beneficial interest in such contribution, the registered partner shall, within a period of thirty days from the date of such change, make a declaration of such change to the limited liability partnership in Form 4B.
Conclusion: In conclusion, the journey of incorporating an LLP demands a nuanced understanding of its intricacies. With insights into the basic comparison with companies, practical formation aspects, and recent amendments, businesses can make informed decisions. The flexibility, limited liability, and potential for growth make LLPs an attractive option. As the business landscape evolves, staying abreast of changes and adhering to regulatory requirements ensures a successful LLP venture. Embracing the unique features and benefits, entrepreneurs can navigate the complexities, fostering a resilient and compliant business structure in the competitive market.