Limited Liability Partnership (LLP) has become a preferable form of organization among entrepreneurs as it incorporates the benefits of both partnership firm and company into a single form of organization.
• The LLP is a separate legal entity, is liable to the full extent of its assets but liability of the partners is limited to their agreed contribution in the LLP.
• The LLP is an alternative corporate business form that gives the benefits of limited liability of a company and the flexibility of a partnership
1. They are a separate legal entity from their Members.
2. They have the benefit of limited liability for their Members.
3. They are taxed as a partnership.
4. They have the organisational flexibility of a partnership.
5. Any agreement (“LLP agreement”) between the Members governing the operation of the LLP is a private document which is confidential to the Members.
6. They must have at least two “designated” Members.
7. They have the ability to create floating charges.
8. It is a body corporate with separate legal entity from its partners. The mutual rights and duties of the partners of an LLP are governed by LLP Agreement.
9. LLP is liable to the extent of its assets. Partner’s liability is limited to the extent of agreed contribution (capital) in the LLP Agreement.1. Proof of Registered Office
An LLP is a separate legal entity. This means that it has assets in its own name and can sue and be sued. Furthermore, one partner is not responsible or liable for another partner’s misconduct or negligence.
The partners are free to draft the agreement as they please, with regard to their rights and duties.
An LLP has partners, who own and manage the business. This is different from a private limited company, whose directors may be different from shareholders. For this reason, VCs do not invest in the LLP structure.
The liability of partners is limited to extent of his / her contribution to LLP.
An LLP is much easier and cheaper to run than a private limited company as there are just three compliances per year.
Not only is it easy to start, but it’s also easier to wind-up an LLP, as compared to a private limited company.
VCs would be unwilling to invest in an LLP structure. This is because all ‘shareholders’ in an LLP must be partners, which have certain responsibilities toward the entity. No VC wants any of these responsibilities, and would, therefore, only invest in a private limited company.
An LLP can be structured in such a way that one partner has more rights than another. So it isn’t a one vote per share system. So, some lesser partners may feel compromised if higher shareholders choose to move the business in a direction that affects their interests.
An LLP’s compliances are minimal, but if you don’t complete them, you could end up paying more in fines than you would with a private limited company. These fines can escalate to Rs. 5 lakh for a single year.
All designated partners of the proposed LLP shall obtain “Designated Partner Identification Number (DPIN)”. You need to file eForm DIR-3 in order to obtain DIN or DPIN. In case you already have a DIN (Director Identification Number), the same can be used as a DPIN.
The Information Technology Act, 2000 provides for use of Digital Signatures on the documents submitted in electronic form in order to ensure the security and authenticity of the documents filed electronically. This is the only secure and authentic way that a document can be submitted electronically. As such, all filings done by the LLP(s) are required to be filed with the use of Digital Signatures by the person authorised to sign the documents.
To file an eForm or to avail any paid service on LLP portal; you are first required to register yourself as a user in the relevant user category, such as registered and business user.
Apply for the name of the LLP to on the MCA Portal (Reservation of name of LLP) after login into the MCA Portal. After that depending upon the proposed LLP, file required incorporation Form FiLLiP (Form for Incorporation of Limited Liability Partnership
Once the form has been approved by the concerned official of the Ministry, you will receive an email regarding the same and the status of the form will get changed to Approved.
Incorporation certificate shall be generating by LLPIN.
After incorporation of LLP, an initial LLP agreement is to be filed within 30 days of incorporation of LLP. The user has to file the information in Form 3 (Information with regard to Limited Liability Partnership Agreement and changes, if any, made therein).
All the partners are required to provide their PAN at the time of registering LLP. PAN card acts as a primary ID proof.
Partner can submit anyone document out of Voter’s ID, Passport, Driver’s license or Aadhar Card. Name and other details as per address proof and PAN card should be exactly same. If spelling of own name or father’s name or date of birth is different in address proof and PAN card, it should be corrected before submitting to RoC.
Latest bank statement, telephone bill, mobile bill, electricity bill or gas bill should be submitted as a residence proof. Such bill or statement shouldn’t be more than 2 months old and must contain the name of partner as mentioned in PAN card.
Partners should also provide their passport size photograph, preferably on white background.
For becoming a partner in Indian LLP, foreign nationals and NRIs have to submit their passport compulsorily. Passport has to be notarised or apostilled by the relevant authorities in the country of such foreign nationals and NRI, else Indian Embassy situated in that country can also sign the documents.
1. Easier to Operate : It's much cheaper and easier to operate an LLP than a full-fledged corporation. There are fewer compliances to meet. One major requirement in most of the states is to file an annual report with the Secretary of State.
2. Easier to Wind-up : Just like its formation, an LLP is also much easier to wind-up. You can wind up an LLP in a matter of months, whereas closing down a corporation can take over a year.