Procedure for Incorporate Limited Liability Partnership (LLP)

INTRODUCTION:

Limited Liability Partnership (LLP)is a separate legal entity which has the benefits of “Limited Liability”. It is governed and registered under the Limited Liability Partnership Act, 2008 (notified on 31st March 2008) and the rules made there under. Small and Medium Enterprises (SMEs) can function as LLP. LLP is suitable for service sector especially for the professionals like Company Secretaries, Chartered Accountants, Lawyers, Cost Accountants, etc.

ADVANTAGES:

  • A Limited Liability Partnership combines the advantages of both the Company and Partnership into a single form of organization.
  • In an LLP one partner is not responsible or liable for another partner’s misconduct or negligence.
  • In an LLP, all partners have limited liability for each individual’s protection within the partnership, similar to that of the shareholders of a limited company.
  • However, unlike the company shareholders, the partners have the right to manage the business directly. An LLP also limits the personal liability of a partner for the errors, omissions, incompetence, or negligence of the LLP’s employees or other agents.

REQUIREMENTS BEFORE INCORPORATION OF LLP:

PARTNER:

1. A minimum of two partners will be required for formation of an LLP. There will not be any limit to the maximum number of partners.

2. A body corporate can also be Partner of LLP.

DESIGNATED PARTNER:

1. Every LLP shall be required to have at least TWO DESIGNATED PARTNERS.

2. Designated Partners shall be Individuals.

3. At least one of the Designated Partner shall be a resident of India.

4. 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}.

REGISTERED OFFICE:

1. Every LLP shall have a registered office to which all Communications and Notices may be addressed and where they shall be received. (Section- 13)

PROCESS FOR INCORPORATION OF LLP:

Step 1: Acquire/ Register DSC

The proposed Designated Partner(s) should have Digital Signature Certifcate (DSC). The Information Technology Act, 2000 (IT Act) provides for use of DSC on the documents submitted in electronic form in order to ensure the security and authenticity of the documents filed electronically. Approx Charges for Digital Signature Certificate is Rs.1000/-.

Acquire DSC -A licensed Certifying Authority (CA) issues the digital signature. Certifying Authority (CA) means a person who has been granted a license to issue a digital signature certificate under Section 24 of the IT Act.

Register DSC – The DSC once issued by the CA should be registered by Role check on MCA21 portal as only then the DSC can be used for online filings of LLP e-forms.

Step 2: Application for DIN or DPIN

The Designated partners of the proposed LLP are required to apply for DIN/DPIN in Form DIR-3 by attaching prescribed documents. DIN/DPIN is an eight digit numeric number allotted by the Ministry of Corporate Affairs in order to identify a particular partner of the LLP. Pay the necessary fee of Rs. 500/- by credit card/debit card/net banking.

Note: If the proposed designated partner already having DIN/DPIN need not follow apply for another DIN/DPIN.

Following Information are required to be filed in form DIR-3:

  • Name
  • Father’s Name.
  • Scan Copy of Photo.
  • PAN Card.
  • Aadhaar Card.
  • Scan copy of Residential Address.
  • DSC of Applicant.
  • DSC of CA/CS/Cost Accountant/Director of any company.

Step 3: Search for name availability

Criteria of Name Approval

Selection of business name is crucial for the image of your venture. You select a name which reflects the business you plan. Ensure selected name satisfy LLP Name Guidelines of Ministry of Corporate Affairs.

https://taxguru.in/company-law/roc-availability-guidelines-2011.html

Free name search facility (of existing companies / LLPs) is available on MCA portal. The system will provide the list of similar/closely resembling names of existing companies/LLPs based on the search criteria filled up . Link given below:

http://www.mca.gov.in/mcafoportal/showCheckLLPName.do

Step 4: Filling of form llp-1 (name approval)- Section-16

After Search of Name approval, If name is available according to your search. Then Download Form LLP-1 from the below given Link:

http://www.mca.gov.in/MinistryV2/llpformsdownload.html

Following Information are required to be filed in form LLP-1

  • DIN of Designated Partner.
  • Email Id
  • Occupation
  • State of Register office of LLP
  • Objects of LLP
  • Partners Contribution into LLP
  • Name of LLP
  • Significant of Name
  • If Proposed Name is Based on Trade Mark (NOC from the Owner of TM)
  • DSC of Designated Partner

NOTE:

  • **In case the displayed residential status needs to be updated or the residential Status is not displayed; you are required to file Form DIN-4 on MCA21 portal for updating the residential status of the DP before filing this Form.
  • Ensure that correct details have been provided as the same shall be automatically pre-filled in Form 2 for incorporation of LLP. Append digital signatures and submit the e-form. Pay the necessary fee of Rs 200/- by credit card/debit card/net banking.
  • Upon receipt of an application under Section 16(1) and on payment of the prescribed Fees of Rs. 200/-, the Registrar may, if he is satisfied, subject t to the rules prescribed by the Central Government in the matter, that the name to be reserved is not one which may b e rejected on any ground referred to in sub-section (2) of Section 15, reserve the name for a period of three month from the date of intimation by the Registrar.

Step 5: Filing of (Form 2) for Incorporation and Subscription Document

After receiving of Name approval Letter from ROC within 90 days there is need to prepare and get sign all the documents required to be attached in Form-2 and file Form-2 with ROC. Download Form LLP-2 from the below given Link:

http://www.mca.gov.in/MinistryV2/llpformsdownload.html

INFORMATION REQUIRED TO BE MENTION IN FORM LLP-2

  • Enter the proposed address of the registered office and valid email ID of the LLP.
  • Enter the main division of industrial activity- “given below in Annexure A”
  • Enter the No. of Designated Partner.
  • Enter the total monetary value of contribution by all the partners/ designated partners of the LLP. Value of contribution cannot be less than the contribution entered at the time of name availability.

DOCUMENTS REQUIRED TO BE ATTACH IN FORM LLP-2

  • Proof of address of registered office of LLP
  • Subscribers’ sheet including consent
  • Detail of LLP(s) and/ or company(s) in which partner/ designated partner is a director/ partner (if applicable).

NOTE:

  • After the Registrar is satisfied that all the formalities with respect to the incorporation has been complied, he will issue a Certificate of Incorporation as to formation of the LLP within maximum of 14 days from date of filing of documents.
  • The Certificate of Incorporation issued shall be the conclusive evidence of formation of the LLP.
  • On incorporation Every LLP so registered shall be assigned a LLP identification number (LLPIN) in one consecutive series. Pay the necessary fee of Rs 500/- by credit card/debit card/net banking

Step 6: Drafting of LLP agreement

Section 23(3) of the LLP Act provides that an agreement in writing made before the incorporation of a LLP Between the persons who have subscribed their names to the incorporation document.

This is common, and also advisable, to have an agreement between the persons who have subscribed their names to the incorporation documents of a LLP. Such agreements usually relate to preliminary and pre-incorporation expenses of a LLP and their subsequent ratification by the LLP, after incorporation. The provison of Secton- 23(3) suggests that such an agreement(s) may impose obligations on the LLP only when such an agreement(s) is ratified by all the partners after the incorporation of the LLP.

The LLP agreement is very lengthy document and should be on Stamp paper.

The LLP Agreement must be stamped in accordance with the stamp Act applicable in the relevant state where LLP is being incorporated.

Its include information as given below:

Effective Date of LLP Agreement, Registered Office of LLP, Business of LLP, Contribution of Partners, Profit Sharing Ratio, Provisions for Admission, Resignation, Retirement and cessation of partners, Removal of Partners, Rights of Partners, Duties of Partners, Duties & Responsibilities of Designated Partner, Meetings, Liability of LLP, Winding up & Dissolution, Accounting Year, Audit, Jurisdiction, Validity of this Agreement etc.

Step 7: Filling of LLP agreement (form- 3)

It is not mandatory to file LLP agreement at the time of registration and same can be file in form LLP-3 within 30 days of Incorporation of LLP. Designated partners are responsible for doing all acts, matters and things that are required to be done for complying with the provisions of the LLP act. They are liable to all penalties imposed on the LLP. So it is very important to draft LLP agreement with professional help.

The LLP agreement has to be uploaded. Once it gets approved all the formalities for registration gets completed. Pay the necessary fee of Rs 50/- by credit card/debit card/net banking.

Step 8: Apply of PAN for LLP

After approve letter send by MCA of your registered email-id of Form-3, next you need to apply for LLP PAN Card (Form 49A) also pay the necessary fee of Rs 110/- by credit card/debit card/net banking. Apply through below link:

https://tin.tin.nsdl.com/pan/form49Adsc.html

Information kit for Filling Form – 49A (New PAN Application) through below link:

https://tin.tin.nsdl.com/pan/Instructions49A.html#instruct_form49A

Following Information are required to be filed for PAN

  • Area Code, AO type, Range Code, AO Number (search through For Non International Taxation AO details)
  • Name of Limited Liability Partnership
  • Date of Incorporation of LLP
  • LLP Address
  • Registration Number of LLP (given by MCA after Form-2 Approved)
  • Digital Signature of Proprietor.

Step 9: Apply of TAN for LLP

After that you need to apply for LLP TAN (Form 49B), also pay the necessary fee of Rs 65/- by credit card/debit card/net banking. Apply through below link:

https://tin.tin.nsdl.com/tan/form49B.html

Information kit for Filling Form – 49B (New TAN Application) through below link:

https://tin.tin.nsdl.com/tan/InstructionsTanRegistration.html

Following Information are required to be filed for TAN

  • Area Code, AO type, Range Code, AO Number (search through AO details)
  • Name of Limited Liability Partnership
  • LLP Address
  • Digital Signature of Proprietor.

After Completion of TAN of LLP, you can start your business.

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Qualification: CA in Practice
Company: S G Agrawal & Associates
Location: pune, Maharashtra, IN
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