LLP is a corporate business form that enables entrepreneur to combine and operate in flexible, innovative and efficient manner. It provides benefits of limited liability while allowing its members the flexibility for organizing their internal structure as a Partnership.
The LLP shall be a body corporate and a legal entity separate from its partners. Any two or more persons, associated for carrying on a lawful business with a view to profit, may by subscribing their names to an incorporation document and filing the same with the Registrar, form a Limited Liability Partnership.
Owing to flexibility in its structure and operation, it would be useful for small and medium enterprises, in general, and for the enterprises in services sector, in particular.
Key benefits of LLP
• Professionals can form Multi-disciplinary Professional LLP.
• Low cost of Formation.
• Easy to incorporate, manage & run.
• No requirement of any minimum capital contribution, and maximum number of partners.
• LLP & its partners are distinct from each other.
• Partners are not liable for Act of partners.
• Few Compliances.
• Limited Liability to Partners
• Less Government Intervention.
• Easy to dissolve or wind-up.
• Audit requirement only in case of contributions exceeding Rs. 25 lakh or turnover exceeding Rs. 40 lakh
Following is the step wise incorporation process of LLP
Step 1: Deciding the Partners and Designated Partners
An LLP can be incorporated with atleast two partners who can be Individuals or Body Corporate through their nominees and there is no restriction on maximum partner . Further atleast two shall be Designated Partners, of which atleast one must be an Indian Resident.
‘Designated Partner’ are responsible for fulfilling all the essential requirements involved in starting and running an LLP and at least two designated partners are required for an LLP.
Step 2 : Obtaining DIN No. & Digital Signature
Every partner who intends to be Designated, will need Director Identification Number (DIN). DIN can be obtained from the Central Government. If a person already has a DIN, the same can be used for forming LLP.
All the forms filled with ROC at the time of incorporation and afterwards needs to be digital signed, hence Designated partners of proposed LLP needs to obtain a Digital Signature Certificate (DSC)
Step 3 : Name Reservation
Designated partner on obtaining DIN, can make an application (Form1) for reservation of name for proposed LLP from MCA . The name of the limited liability partnership shall not be similar or identical with Company or LLP already registered in India and it should not contains words prohibited under the ‘Emblems and Names (Prevention of improper use) Act, 1950’or which are also not ‘Undesirable’ in the opinion of Central Government.
The application for reservation of name of proposed LLP will be processed and approved from the Registrar of Companies (ROC) in the State of Incorporation.
Step 4 : Drafting of LLP Agreement
LLP agreement is an agreement made between the partners regarding the relationship between the individual partners in the LLP. It generally consists of management policies, admission new partners, rights and obligation of partners, policy making strategies, and so on.
Step 5 : Filing of Incorporation Documents
Incorporation and Subscription document (form 2) needs to be filled with MCA, within 60 days of Name Reservation approval. Form 2 contains.
• where the appointed partner is a body corporate, copy of resolution on the letterhead of such body corporate to become a partner in the proposed LLP and a copy of resolution/ authorization of such body corporate also on a letterhead mentioning the name and address of an individual nominated to act as nominee/designated partner on its behalf.
• Subscribers' sheet including consent
• Proof of address of registered office of LLP.
• In principle approval of regulatory authority, if required.
• Detail of LLP(s) and/ or company(s) in which partner/ designated partner is a director/ partner
The Incorporation and Subscription document of LLP will be processed and approved from the Registrar of Companies (ROC) and issue “Incorporation Certificate” .
Step 6 : Filling of LLP Agreement
Once, the Incorporation Certificate is issued, the LLP will be considered to be registered, and within 30 days LLP Agreement needs to be filled with MCA.