Limited Liability Partnership
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Introduction
LLP stands for Limited Liability Partnership. It is a type of business entity in India that combines the benefits of a partnership and a company. In an LLP, the liability of the partners is limited to their investment in the business, and they are not personally liable for the debts and losses of the business. LLPs are governed by the Limited Liability Partnership Act, of 2008.
The Number of Partners in LLP
Every LLP needs to have at least two people that are partners, and two people that are designated partners. The number can extend to anything beyond this, but this is the minimum that is required. At least one of the designated partners needs to be an Indian citizen and resident. There is no cap on the maximum number of partners that can be there in an LLP.
An Artificial Person for Legal Purposes
The law recognizes LLPs as artificial legal persons, and therefore they can have all the rights that a person is supposed to have.
Can a private entity be converted to LLP?
According to the provisions of the Act, a private entity or firm can transform into LLP. any unlisted public company can do this at any given time.
Why the need for LLP?
It has been seen that people who mainly depend on LLPs have a certain reputation they can work with. LLPs are usually operated by people who have influence, power, and experience so that their venture does not crash. This is also why creditors pay them money. They put together resources to gain more profit and increase the prospects that the LLP has of growing.
Who can be the Partners in an LLP
- An Individual unless disqualified.
- A Body Corporate which includes:
Indian Company
Companies incorporated outside India
LLP registered in India
LLP incorporated outside India
The below-mentioned cannot act as partners/designated partners in an LLP as
they are not covered in the definition of Individual/body corporate
- An individual, if he is of unsound mind by a Court of competent jurisdiction; is an
undischarged insolvent, or he applied to be adjudicated as insolvent and his
application is pending.
- A Minor Corporation sole
- Co-operative society
- Trust (subject to certain exceptions as mentioned in the article)
- Partnership firm
- Association of person
- Hindu Undivided family.
- Other forms of unregistered business entities.
Some of the key features of LLP in India include:
- Separate Legal Entity: An LLP is a separate legal entity that is distinct from its partners. It can enter into contracts, own property, and sue or be sued in its name.
- Limited Liability: The liability of the partners in an LLP is limited to their contribution to the LLP. They are not personally liable for the debts and losses of the business.
- No Minimum Capital Requirement: There is no minimum capital requirement for starting an LLP. The partners can contribute any amount of capital they deem appropriate
- Management: An LLP is managed by the partners, who have the flexibility to run the business as they see fit. They are not required to appoint a board of directors or hold regular meetings.
- Taxation: LLPs are taxed as a partnership, which means that the profits and losses are passed through to the partners, and they are taxed according to their tax rates.
- Compliance: LLPs are required to comply with various regulatory requirements, such as filing annual returns, maintaining books of accounts, conducting annual audits, etc.
- Foreign Investment: LLPs can attract foreign investment, subject to the foreign direct investment (FDI) policy of India.
LLP is a popular business entity in India that provides the benefits of limited liability and flexibility in management. It is suitable for small and medium-sized businesses, professional firms, and startups.
Differences between LLP and Partnership in India:
Liability: In a partnership, the partners have unlimited liability, which means that they are personally liable for the debts and losses of the business. In an LLP, the liability of the partners is limited to their investment in the business, and they are not personally liable for the debts and losses of the business.
Legal Entity: A partnership is not a separate legal entity from its partners, while an LLP is a separate legal entity that is distinct from its partners. An LLP can enter into contracts, own property, and sue or be sued in its name.
Registration: A partnership does not need to be registered, and it can be created by a simple agreement between the partners. An LLP, on the other hand, needs to be registered with the Registrar of Companies (ROC) and requires a registration fee.
Number of Partners: A partnership can be formed with a minimum of two partners, while an LLP must have a minimum of two partners and can have a maximum of unlimited partners.
Management: In a partnership, the partners manage the business, and all partners have an equal say in the decision-making process. In an LLP, the partners can appoint designated partners who are responsible for managing the business, and the other partners have limited involvement in the decision-making process.
Annual Compliance: A partnership is not required to file an annual return or undergo an annual audit, while an LLP is required to file an annual return and undergo an annual audit.
LLP and partnership have different legal structures, liability protection, registration requirements, number of partners, management structure, and annual compliance requirements. While a partnership is a simple and informal business structure, an LLP provides limited liability protection to the partners and is a more formal business structure that requires registration and annual compliance.
Documentation required?
Limited Liability Partnership (LLP)
[Governed by: Limited Liability Partnership Act, 2008 | MCA]
As the partners of the partnership firm have unlimited liability, to reduce the financial risk upon them, the LLP concept was introduced. It ensures that the liability of a partner is limited only to the amount of capital contributed by him.
Following are the steps to incorporate LLP:
- Application for DIN or DPIN
- Registration of DSC
- Registration as a user on the LLP portal
- Incorporation of LLP by filing Form 2
- Filing of LLP Agreement within 30 days of LLP incorporation
The checklist for incorporation of an LLP
- For Name Approval
The following documents are required for approval of name, only if required
- The name should be unique and distinct from existing Companies/LLPs and
trademark
- NOC of Trademark Owner, if any
- Detailed Objects of the LLP
- For DSC Application
- Copy of Self-attested PAN
- Copy of Self-attested Address Proof(Aadhar Card)
- Photo of the Applicant
- Valid E-mail ID of the Applicant
- Valid Mobile Number of the Applicant
- For DIN (Director Identification Number) Application
The following documents/details are required for the DIN requirement under Spice
- Self-attested PAN of the applicant
- Self-attested ID proof apart from PAN(Voter id card/DL/Passport)
- Self-attested copy of Residential proof (Bank Statement/Electricity Bill/Telephone
bill/ Mobile Bill not older than 2 months)
- Education Qualification
- Place of Birth
- Duration of stay at the current address
- For LLP Incorporation
- ID proof of the Partners (PAN, Aadhar Card, Passport)
- Total Contribution of LLP and the proportion of contribution by the Partners
- Detailed Objects of the LLP
- Utility bill for the registered office of the LLP (Not older than 2 months)
- Proof of ownership along with NOC of the owner
- Address Proof of Partners {Bank Statement/Electricity Bill/Telephone bill/ Mobile
Bill
not later than 2 months}
- Passport-size pictures of Partners
- DSC of Partners
- Mobile No. and Email id of Partners
- Provide DIN if already have Partners
How can we help?
We can help an LLP (Limited Liability Partnership) in several ways, including:
- Formation and Registration: We can assist in the formation and registration process of the LLP by preparing and filing necessary documents with the relevant authorities.
- Compliance: We can help the LLP comply with various legal requirements, such as maintaining proper records, filing annual returns, and complying with taxation laws.
- Drafting and Reviewing Contracts: We can assist the LLP in drafting and reviewing contracts with its partners, clients, vendors, and suppliers. They can also help in negotiating and resolving disputes arising out of such contracts.
- Intellectual Property Protection: We can help the LLP protect its intellectual property rights, such as trademarks, patents, copyrights, and trade secrets.
- Employment Law: We can advise the LLP on various employment-related issues, such as drafting employment contracts, complying with labor laws, and resolving disputes with employees.
- Dispute Resolution: We can help the LLP in resolving disputes with its partners, clients, vendors, and suppliers through mediation, arbitration, or litigation.
We can provide valuable guidance and support to an LLP, helping it navigate the complex legal landscape and avoid legal pitfalls.
