LLP or Limited Liability Partnership is nothing but an alternative corporate form that provides benefits of “Limited Liability” to the designated partners at reasonable costs of compliance.
It is a legal entity. However, the liability of all Designated Partners is limited to the portion as contributed by the Designated Partners. Hence, LLP have benefits of both ie., Company as well as of partnership.
Features of LLP
Acc. to Section 3 of the Limited Liability Partnership Act (“LLP Act”), 2008, as amended, LLP is a body corporate formed under the LLP Act having features of separate legal entity from its partners.
Perpetual Succession is one of the benefits of forming a LLP, a member may come and do but LLP will carry on forever.
Separate Legal Entity
LLP is a separate legal entity which means that the LLP is solely responsible for the acts beings done. The liability of the Partner is being restricted only to the proportion being invested by the partners.
It means the action of one partner cannot make the other liable for his unauthorized actions. Partners are agents of LLP.
LLP agreement is the most crucial document which contains the rights and duties of all the partners. Each and everything is governed by the LLP agreement.
Acc. to Section 26 of the LLP Act, every Partner is an agent of the LLP. Liability of the partners is limited to the proportion as contributed by them in a LLP
Artificial Legal Person
LLP is an artificial legal person in the eyes of the law. It can enter into any contracts in its own name. It has all rights as are provided to partners under the LLP agreement. It can file a suit and a suit can be filed against the LLP in its own name.
Min. and Max. Number of Partners in an LLP
Every LLP must have at least a minimum no. of 2 partners and at least two individuals to be appointed as designated partners. Further, at least 1 designated partner shall be resident in India. No maximum limited has been decided which means that LLP can have any no. of partners.
PROCEDURE TO INCORPORATE LLP
Step 1: Obtaining of Digital Signature Certificate (DSC) for the Designated Partners
In order to move an application for Director Identification Number (DIN) or Designated Partner Identification Number (DPIN) for Partners, a Digital Signature Certificate (“DSC”) will be required. This means that DSC is a must for the partners for the filing of DIN application.
Step 2: Obtain Director Identification Number (DIN) for the Partners of LLP
It is second step after the DSC has been obtained, Partners are required to make DIN in order to move an application for Incorporation of LLP. Few documents and forms are required to obtain DIN for all partners. Generally, people are confused with DIN and DPIN both are the same thing if you have DIN. You can use it form to incorporate a LLP in place of DPIN. There will be no issue.
Step 3: Obtaining Name Approval
Once two DPIN’s are available, an application can be filed with mca for reservation of name. LLP naming guidelines must be kept in time while filing of an application. The submitted application shall be review by the ROC and processing shall be done.
Step 4: Filing for documents related to Incorporation
Once the name is being approved by the RoC, an application for Incorporation shall be filed. After name approval, the Partner have sixty days to file all the documents for Incorporation along with the supporting document. RoC after verifying and satisfying himself shall issue a certificate of Incorporation.
It is to be noted here that once the certificate of Incorporation issued, LLP is required to file LLP agreement within 30 days from the date of issue of the LLP incorporation certificate. Failure of which may incur late fees for filing of respective form.
Praveen Singh is a Founder and Managing Partner of TRIJURIS (Legal & Taxation Service Provider in Delhi). The head office of the firm is based in Delhi. The firm inter-alia engaged in providing services related to Corporate and Commercial laws advisory, Indirect taxation, Setting up industries in India as well as outside India, Legal recovery services and other regulatory matters. The firm has actively participated in assisting MSMEs in India and small businesses to scale there business and closing working with them in respect of recovery of their legitimate dues.