A Limited Liability Partnership is a very sought-after form of organization as it provides an appropriate combination of advantages of both a partnership firm and a company in a single entity. The concept of LLP was introduced in India in 2008, and the Limited Liability Partnership Act, 2008 governs all the LLP within the jurisdiction of India.
The minimum number of partners required in forming an LLP is two; however, there is no restriction upon the maximum number of partners in its formation. An LLP possesses the attributes of perpetual succession and juristic personality. There must be at least two designated partners who shall be individuals; further, at least one of them shall be a resident in India.
The LLP Agreement governs all the rights and duties of all the designated partners, along with which they are responsible for the compliance of all the provisions of the Limited Liability Partnership Act, 2008 and the provisions of the LLP agreement. Registration of LLP is granted by the Registrar of companies.
Features of an LLP
- Separate Legal Entity- The LLP possesses its own distinct identity from that of its members, subject to registration. Registration of an LLP is granted by ROC of India.
- Limited Liability of Partners- The partners in an LLP are only liable to the extent of their contribution towards the capital.
- Low Cost- LLP consists of low costs of formation.
- Less Compliance and Regulations- Comparatively, there are lesser compliances and regulations required in the incorporation of an LLP.
- No minimum capital contribution required – There is no minimum capital contribution requirement.
Disadvantages of an LLP
- Penalty for non-compliance – Though the compliances and regulations associated with the formation of an LLP are minimal, if they are not followed through, the LLP will be subject to heavy penalties. Despite not having much activity, at the end of the financial year, the LLP must file for returns, failing which a heavy penalty will be levied upon the LLP. Registration of LLP is granted by ROC.
- Dissolution and Winding-up – The minimum requirement for the number of members in the LLP is 2; if the LLP fails to maintain the minimum requirement for 6 months, it will lead to its dissolution. Further, the LLP may be dissolved if it’s unable to pay its debts.
- Complications in raising capital – LLP doesn’t go by the concept of equity or shareholders like a company. Thus it’s difficult to raise capital for the LLP.
Advantages of an LLP
- Separate Legal Entity – An LLP has a separate personality which means it can easily enjoy all its legal rights; this is subject to its registration. Registration of LLP is granted by roc. It can sue and be sued; contracts can be signed in the name of the LLP. Which enhances the credibility of the LLP in the business.
- Limited Liability of Partners – The partners associated with it are only liable to the extent of their contributions towards the capital. Which essentially means they will not have to bear losses on a personal level.
- Low Cost – The cost of incorporation of an LLP is much lesser than the cost involved in the incorporation of a public and private company.
- Less Compliance – The compliances associated with the formation and maintenance of an LLP is much lesser comparatively. Further, the LLP is only required to file two statements annually – Annual Returns and Statement of Accounts & Solvency.
- No minimum capital contribution is required – LLP has no bar over the minimum capital contribution. Hence, no requirement of having a minimum paid-up capital for registration of LLP granted by roc.
LLP vs. Company
The Internal governance and the structure of the company are points of the basic difference between an LLP and a company. A Joint Stock Company is governed by the Companies Act, 2013, whereas an LLP is governed by the LLP agreement between the partners and the Limited Liability Partnership Act, 2008. An LLP enjoys more flexibility than a company. Registration of LLP is granted by ROC, and registration of the company is also granted by the Registrar as per the provisions of the companies act.
LLP vs. Partnership Firm
An LLP has a juristic personality, and it is liable to the extent of its assets. The partner’s liability is to the extent of their contributions towards the capital. Establishing an LLP is suited for small and medium enterprises due to its structural and operational flexibility. Registration of llp is granted by ROC.
A partnership is an agreement between two or more persons who combine their capital and resources to contribute to the business and agree to share the profits earned. There are various types of a partnership firm. Registration of a partnership firm is not a legal mandate, and it is recognized even when it’s not formally registered. All the partners are liable for any loss incurred by the firm to third parties.
Registration of an LLP
- User Registration
- Register on the website of the Ministry of Corporate Affairs for LLP services. Registration of LLP is granted by ROC.
- Fill out the registration form and select the username and password.
- Following this, the digital signature certificate is required to be uploaded.
- Await the message of successful registration of LLP is granted by ROC.
- Obtain Designated Partners Identification Number
- All the designated partners shall obtain the DPIN/DIN (Designated Partner Identification Number/ Director Identification Number)
- DPIN/DIN may be applied from the MCA website. It is pertinent to note that registration of LLP is granted by ROC upon satisfaction, so the procedure must be followed thoroughly.
- Obtain Digital Signature Certificate
- The designated partner or partner of the LLP shall obtain the Digital Signature Certificate from any authorized certifying agency.
- The relevant information about the authorized certifying agency is available in the LLP portal under the “Certifying Authorities” tab. It is important to know that registration of LLP is granted by ROC upon satisfaction, so the procedure must be followed thoroughly.
- Reservation of Name
- Log onto the LLP portal and proceed to the E-Forms link.
- Form-1 is for the reservation of a name. The details are to be filled, and then the selection of names must be made. The upper limit of the choices made is 6.
- Any Partner/DP may submit the form, add the digital signature and make the submission of the e-form.
- Make the payment of the fees. The portal also provides a list of similar names of already existing companies/ LLP.
- Details of at least two DP, out of which one must be a resident of India, shall be provided in the application for the reservation of name.
- Check the status of your application and for further information, proceed to the user guide, which is an instruction guide on the home page. It is pertinent to note that registration of LLP is granted by ROC upon satisfaction, so the procedure must be followed thoroughly.
- Incorporation of LLP
- Post the reservation of the name by the Registrar as registration of llp is granted by ROC, Form-2 (Incorporation Document and Statement) must be filled.
- Payment of the prescribed registration fee, which is based on the total capital contribution made by the partners.
- Digital Signature is required on the incorporation document. This is to be done by the individual who is named on the document as a DP and has the permanent DPIN. Along with this, the document must be signed by an advocate/ company secretary/chartered accountant/cost accountant in practice who is primarily engaged in the formation process.
- Upon being satisfied with the submission of the complete document and the compliance with the provisions of the LLP Act, the Registrar will register the LLP as registration of LLP is granted by ROC.
- This is done within 14 days of filling Form-2 at maximum. The Registrar will then issue a certificate of incorporation in Form-16. Registration of LLP is granted by ROC
- Check the status of the application and for more information, proceed to the user guide. The registration of LLP is granted by ROC.
- Filing of LLP Agreement and Partner’s Details Form subject to registration of LLP is granted by ROC.
- Form-3(Info regarding the LLP agreement and alterations, if any) and Form-4(Notice of appointment of partner/DP and their consent, etc.) is to fill along with the prescribed fee.
- This could either be done simultaneously while filing Form-2 or within 30 days from the date of incorporation. The registration of llp is granted by ROC.
Registration of LLP is granted by the ROC, and it is highly recommended, even though it’s not a legal mandate. The partnership provides clarity and a sense of transparency amongst all the partners. Registration enables the partners to file a case against third parties and other partners.
It grants the power to claim set-off against any third-party claim, and it makes the process of conversion into any other business structure much easier. The above-mentioned points are some essentials that one is required to be aware of before starting a partnership firm. A partnership firm is an appropriate manner to initiate a business. Registration of LLP is granted by ROC.
However, as an entity grows, diversification and expansion happen in the business structure as per the requirements of the individuals. Hence these key points enable one to make better decisions to establish a successful business. The registration of LLP is granted by ROC, and to know more, get online legal advice. It is pertinent to note that registration of LLP is granted by ROC upon satisfaction, so the procedure must be followed thoroughly.