Limited Liability Partnership
"LLP firm registration"
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“Great riches and limited liability are two situations that are infrequently combined”.
The biggest invention of contemporary times in terms of business model was brought about by the evolution of a traditional partnership firm’s legal framework.
The idea of a “Limited Liability Partnership” (LLP) not only eliminates the drawbacks of a partnership firm but also proudly combines the advantages of both partnership firms and companies with characteristics like a distinct legal entity, perpetual succession, stability in existence with no effect from changes in partners, etc.
“LLPs proved to be an innovative way of conducting company, particularly for those led by experts with varied specialties to fulfil their business objectives.”
This was the ideal solution that had been needed for a long time. It had the flexibility of a partnership, the flexibility of organising internal management on the basis of a mutually agreed-upon agreement among the partners, as well as the advantages of limited liability of a company, including but not limited to limited liability, all at a low compliance cost.
Partnership with Limited Liability – “A Business Vehicle”
A new type of limited liability corporate entity is the LLP.
It is a different type of corporate business entity that not only offers limited liability protection at a minimal compliance cost, but also enables its partners the freedom to set up their internal organisation in the manner of a conventional partnership.
Since the LLP is a separate legal entity, the partners’ responsibility will be constrained while the LLP will be held accountable for the entire amount of its assets.
Because it combines the traits of a private company and a traditional partnership, LLP is a hybrid form of a partnership and company.
A Limited Liability Partnership’s characteristics
- A limited liability partnership is a body corporate created and incorporated in accordance with the LLP Act, 2008, which became effective on April 1, 2009, and is a separate legal entity from its partners.
- Perpetual succession is a benefit of limited liability partnerships. (This indicates that the LLP may continue to exist even if one or more of the partners in the company resign, die, or become insane.)
- The existence, rights, and responsibilities of the limited liability partnership are unaffected by changes in the LLP’s partners.
- Each LLP must have a minimum of two partners, who may be either individuals, corporations, or a mix of the two.
Note: A HUF, a cooperative society, a sole corporate entity, or any other body corporate that the Central Government has specifically prohibited from membership in the LLP is not permitted to join as a partner.
Note: The sole partner of an LLP who intentionally conducts business for more than six months after the number of partners has been reduced to two is personally liable for the obligations of the LLP accumulated during that time.
- Each LLP must have a minimum of two individual authorised partners, one of whom must be a resident of India. So, starting an LLP firm has the same requirements as starting a private company.
- Each partner will serve as an agent for the LLP in his or her own right, thus no one partner can obligate the other partners by his or her actions.
- “Designated Partner” definition
Similar to a managing director in a company, a designated partner is a partner. He is one of the partners of the LLP who oversees day-to-day business dealings, compliances, and operations.
Characteristics of Designated Partners:
- Each LLP must have two individual authorised partners, at least one of whom must be a resident of India.
- At least two partners of the LLP or nominees of the bodies corporate involved must act as designated partners if all of the partners are bodies corporate or if one or more partners are.
- By and according to the terms of the limited liability partnership agreement, any partner may change his or her status as a designated partner.
Limited Liability Partnership Benefits
- As with a firm, it provides eternal succession and a distinct legal entity.
- Each LLP member has a set amount of liability.
- Starting an LLP requires a minimum of two members and no minimum capital requirement. Additionally, there is no cap on the number of members (like in case of a private limited company and partnership firms).
- Contrary to corporations, not all LLPs are required to conduct audits; audits are only required when specific thresholds are reached.
- In addition to having a limited liability characteristic, it is just as adaptable as a partnership firm.
- One can register by filing paperwork electronically, and the registration procedure is also quite straightforward. DSC must be obtained by a designated partner in order for them to sign these papers as well as additional paperwork that may be necessary.
- Tax provisions are identical to those for partnership firms.
- A limited liability partnership can easily become a private or public firm.
Key distinctions between a partnership firm and an LLP?
Partnership | LLP |
| The Indian Partnership Act of 1932 governs partnerships. | The Limited Liability Partnership Act of 2008 governs LLPs. |
| An organisation called the Registrar of Firms registers partnerships. | A limited liability partnership must be registered with the Ministry of Corporate Affairs (MCA). |
| A partnership is an agreement between two or more people or partners to operate a business and split earnings and losses according to an established percentage.. | A limited liability partnership (LLP) combines a firm with a partnership, however the partners are only partially liable for the debts and liabilities of the partnership.. |
| A partnership firm is not unique from the individuals who make it up. | Since an LLP is a distinct legal person, it has the ability to bring lawsuits against other parties without involving the partners. |
| A firm’s partners would be held completely liable. | While in an LLP, the partners’ liability would be constrained. |
The partnership firm would be dissolved in the event of a partner’s death or retirement. | The LLP would not be dissolved by a partner’s retirement or demise. |
| A partnership can be created orally or through an unregistered or registered deed of agreement. | LLP is created by an LLP agreement and an incorporation document, giving it legal status.. |
| No partnership, whether registered or unregistered, may have more than 100 partners. | Since the Act does not specify an upper limit, LLP may have more than that number. |
| Property cannot be held in the name of a partnership. | A limited partnership is able to own property under its own name.. |
The steps for registering an LLP online
Purchase/Register DSC (digital signature certificate)
- All proposed LLP’s designated partners are required to get a “Designated Partner Identification Number (DPIN).” Use your existing DIN (Director Identification Number) as your DPIN if you have one.
- Obtain the name of the LLPAccording to statutory requirements, each limited liability partnership must end its name with either the phrase “limited liability partnership” or the abbreviation “LLP.”
- The incorporation document must be completed after the Name is approved.
- It includes information like the name of the prospective business and the registered office address of the LLP.
Additionally, it must include all necessary information, including the names and addresses of the LLP’s Partners and Designated Partners. - After the LLP is incorporated, an initial LLP agreement must be filed within 30 days of the LLP’s incorporation. The Registrar of Companies must also be notified of any changes to the LLP agreement.
Documents needed to register an LLP
- Documents needed from the Company
- Documentation of the registered office’s address.
- Certificate for a digital signature
- Paperwork needed from the Partners
- PAN Card
- Identity Proof / Residence Proof (Aadhar Card/ Voter ID card/Passport)
- Passport size photographs of all partners.