Limited Liability Partnership

Limited Liability Partnership

Introduction

Limited liability partnership is a combination of both partnership and corporation. It has the feature of both these forms. As the name suggests partners have limited liability in the company which means that personal assets of the partners are not used for paying off the debts of the company. Nowadays it has become very popular form of business as many entrepreneurs are opting this. There are a number of partners in the firm and hence they are not liable or responsible for others misconduct. Every one is liable for their own acts. All limited liability partnership is governed under the limited liability partnership act of 2008. However in India LLP was introduced in April 2009.

It is a separate legal entity distinct from its owners. It can enter into a contract and acquire property in its name. LLP form is not just prevailing in India. It is also seen in countries like the United Kingdom, Australia etc.


Advantages of Limited liability partnership

Easy to form

- Forming an LLP is an easy process. It is not complicated and time consuming like the process of a company. The minimum amount of fees for incorporating an LLP is Rs 500 and the maximum amount which can be spent is Rs 5600.

Liability

- The partners of the LLP is having limited liability which means partners are not liable to pay the debts of the company from their personal assets. No partner is responsible for any other partner misbehaves or misconduct.

Perpetual succession

- The life of the Limited Liability Partnership is not affected by death, retirement or insolvency of the partner. The LLP will get winded up only as per provisions of the act of 2008.

Management of the company

- All the decisions and various management activities are seen and done by the directors of the company. Shareholders receive very less power as compared to the board of directors.

Easy transferability of ownership

- There is no restriction upon joining and leaving the LLP. It is easy to admit as a partner and to leave the firm or to easily transfer the ownership on others.

Taxation

- Yes, it is the benefit of LLP. Limited liability partnership is exempted from various taxes such as dividend distribution tax and minimum alternative tax. The rate of tax on Limited Liability Partnership is less than as compared to the company.

No compulsory audit required

- Every business has to appoint an auditor for checking the internal management of the company and its accounts. However, in the case of LLP, there is no mandatory audit required. The audit is required only in those cases where the turnover of the company exceeds Rs 40 lakhs and where the contribution exceeds Rs 25 lakhs.


Disadvantages

Not covered all states

- Due to various tax benefits and provisions many states restricts the formation of LLP in their states. This leads to a disadvantage as many states don’t allow their entrepreneurs to form this.

Less credibility

- One of the major demerits of Limited Liability Partnership is that many people do not consider this as a credible business. People still trust more on company or partnerships.

Partners not consulting

- Partners of the Limited Liability Partnership don’t consult each other in case of decisions and agreement.

Transfer of interest

- Though interest and ownership can be transferred but it usually takes long procedure. Various formalities are required to comply with the provisions of the act.

Lack of recognition

- As LLP is introduced in India in 2009 only it is not recognized by all. Due to its less recognition, it leads to hindrance in smooth functioning of the firm. People are not likely to form LLP.


Minimum Requirements for LLP

Minimum 2 Designated Partners (DP)

       At least 1 of the DP shall be Indian resident

·         If a body corporate is DP then it has to nominate a natural person

·         Director Identification No.(DIN) has to be obtained by 2 partners

·         Digital Signature Certificate of any one of the DP


Document Requirements 

Firstly you need a DIN or DPIN

Director identification number or the designated partnership identification number is required. It is obtained by filing DIN-1, available online at MCA web portal. It is mandatory for every director of the firm. You will also require documents stated below while registering for DIN or DPIN.

Get documents for LLP Registration form.

1.       Identity proofs of all the designated partners.

2.       PAN card of all the designated partners.

3.       Address proof of all the designated partners.

4.       Utility Bill of the office that you have proposed as your registered office for your LLP.

5.       A No-Objection certificate from the landlord of the location of your registered office.

6.       A copy of the rental agreement.

7.       Get your DSC

Digital Signature Certificate is yet another important document you require while filing for your LLP. Many documents you require need to be filed electronically. They also need to be signed. Here, comes the role of the digital signature. You sign these documents using your digital signature. In order to have a DSC, you can register online with us. We can help you in having your own DSC.


Register

After all these documents are obtained you can go for name approval.  And finally, file for incorporation of your LLP. The documents mentioned in step 2 will be required while filing.

In addition, the landlord of the registered office premises must provide:

·         No Objection Certificate for having the registered office on his/her premises and must submit his/her identity proof and address proof.


Name Selection

·         Original (should not be copied from already registered companies).

·         Unique

·         Easy to remember

·         Should not contain sensitive words (can contain but only with permission) like ‘British India’ and ‘Tribunal’.

·         An LLP based company must end its name with either ‘ Limited Liability Partnership ‘ or ‘LLP’.

·         The name should not be offensive in any manner.

·         Use of words like ‘National’, ‘Central’, ‘Republic’, ‘Federal’ and ‘Union’ is prohibited until and unless the company has the permission of Central Government or is a part of it.

·         The name should be different from existing LLPs even in terms of sound and pronunciation.

·         The name should not depict any connection with government bodies.

·         Words like ‘Bank’, ‘Banking’, ‘Mutual fund’ and ‘Venture Capital’ without permission is not allowed.

·         The name should not contain a registered trademark without the permission of the owner of that particular trademark.

·         The name should not be too general and should be somewhat related to the services or goods your company is providing. This particular factor will help the easy approval of your company’s name.

·         The name should not show any kind of connection with a National Leader.


Procedure to Form LLP

Step 1: Obtain Digital Signature Certificate (DSC) for the Partners

For obtaining DIN (Director Identification Number or Designated Partner Identification Number) for the Partners of the LLP, a Digital Signature Certificate (DSC) is required. Therefore, a Digital Signature Certificate for the proposed Partner must first be obtained. The DSC can be obtained within one day of filing of the DSC Application.


Step 2: Obtaining Director Identification Number for the Partners

Once, Digital Signatures are obtained for the Partners, application for Director Identification Number (DIN) can be made. DIN registration usually happens immediately and in rare cases, additional documents must be submitted to the DIN Cell for approval of the DIN application. DIN and DPIN are synonymous and can be used interchangeably. Each person can have only one DIN.


Step 3: Obtaining Name Approval

Once two DPIN’s are available, application for reservation of name can be made to the MCA. It is important for the promoters to keep in mind the LLP Naming Guidelines and suggest appropriate names for the LLP in the application, to ensure a speedy approval. Once, the application for reservation of name is submitted to the MCA, it will be processed by the Registrar of Companies (ROC) in the State of Incorporation.


Step 4: Filing for Incorporation

Once the name approval application is accepted by the MCA, an LLP name approval letter will be issued to the proposed Partners. The Partners then have 60 days to file the required incorporation documents and register the LLP. In case the LLP is not formed within 60 days of name approval letter, the approval for a name for the LLP would have to be re-obtained.

While filing for the formation of LLP, the documents showing possession of the registered office would be required. Once prepared, the registered office related documents along with the signed subscriber’s sheet must be filed with the MCA for LLP registration in India.

If the application for LLP Registration is acceptable, the Registrar would issue the incorporation certificate. Once, the incorporation certificate is issued, the LLP will be considered to be registered and application for PAN for the LLP can be made. The Partners of the LLP then have 30 days time to file the Partnership Agreement of the LLP with the MCA. In case, the LLP Partnership Agreement is not filed within 30 days, a fine will be applicable.





For more information on this visit TAXAJ.

Posted By Twinkle

Team TaxaJ



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