The idea of a Limited Liability Partnership (LLP) came into existence in the year 2008. It has the qualities of both a company and a partnership firm. It is regulated in India by the Limited Liability Partnership Act 2008. To incorporate an LLP, a minimum of two partners must be present. There is no upper limit. Out of the total number of partners, two designated partners must be individuals and one of them must be an Indian resident. The rights and obligations of these two partners are determined by the LLP agreement. These two are directly responsible for compliance with the provisions of the LLP Act and the provisions provided for in the LLP agreement.
Advantages And Disadvantages Of An Llp
The advantages of an LLP are as follows:
- An LLP has an entity distinct from its partners.
- The partners have limited liability. The partners are only liable to pay for the contributions made by them and not for the loss that the business suffers.
- The expenses incurred for the incorporation of an LLP are low as compared to a public or private limited company. The compliances mandated are also low.
- An LLP can be incorporated without a minimum capital.
The disadvantages of an LLP are as follows:
- Although the compliances mandated by an LLP are minimal, if they are not followed timely a heavy penalty may be imposed.
- An LLP may be dissolved if the number of partners is only limited to two for a period of six months and if the LLP is unable to pay its debts.
- An LLP does not have shareholders or the concept of equity-like a company.
Process For Incorporating Of An Llp
The steps for the formation of a limited liability partnership are as follows:
Obtaining Digital Signature Certificate (DSC)
Before beginning the registration process, one must obtain the digital signatures of the designated partners of the proposed LLP. This is due to the fact that all LLP paperwork is filed online and must be digitally signed. As a result, the selected partner must get digital signature certifications from government-approved certifying institutions.
Applying for a Digital Identification Number (DIN)
One must apply for the DIN of all designated partners or those who plan to be designated partners in the proposed LLP. The application for DIN allotment must be made in Form DIR-
The form requires an individual to provide a scanned copy of papers (often Aadhaar and PAN). The paperwork must be signed by a Firm Secretary who works full-time for the company or by the Managing Director/Director/CEO/CFO of the current company where the applicant will be appointed as a director.
Approval of the name of the LLP
The LLP-RUN (Limited Liability Partnership-Reserve Unique Name) form is used to reserve the name of a proposed LLP, and it is processed by the Central Registration Centre under Non-STP. However, before entering the name into the form, it is recommended that you use the free name search feature on the MCA portal. Based on the search parameters entered, the system will generate a list of names that are almost identical to those of existing companies/LLPs. This will assist you in selecting names that are not already in use. The registrar will only allow the name if it is not unfavourable in the eyes of the Central Government and does not match any existing partnership company, LLP, body corporate, or trademark.
Incorporation of an LLP
The incorporation form is FiLLiP (Form for Incorporation of Limited Liability Partnership), which must be filed with the Registrar of the state in which the LLP’s registered office is located. The form will be a combined form. Fees in accordance with Annexure ‘A’ must be paid. If an individual who is to be nominated as a designated partner does not have a DPIN or DIN, this form allows them to apply for one. Only two people will be able to make an application for allocation. FiLLiP can also be used to make a reservation application. If the applied-for name is accepted, this authorised and reserved name will be used as the LLP’s proposed name.
Filling an LLP agreement
The LLP agreement covers the partners’ mutual rights and responsibilities, as well as the LLP’s and its partners’ mutual rights and duties. The LLP agreement must be submitted electronically in Form 3 on the MCA Portal.
By Devanshi Shukla