Procedure for Registration of Limited Liability Partnership

1. Introduction

Limited liability partnership is a body corporate and legal entity separate from its partners. It enjoys the status of separate legal entity only after incorporation. LLP after registration can hold, acquire or dispose of all kinds of assets. It can sue others and be sued in its own name. Pre-requisites for incorporation of new LLP, provisions relating to registered office of LLP and changes therein and provisions relating to approval, reservation of name and changes there in have been discussed in the present chapter.

2. Pre-requisites for Incorporating a LLP

• • Minimum two partners (Individual or body corporate).
  • Minimum two designated partners who are individuals and at least one of them should be resident in India.
  • Digital signature certificate
  • LLP Name
  • LLP Agreement
  • Registered office

3. Recent Amendments and LLP Incorporation Process

Major amendments have been made under the LLP incorporation Rules vide Limited Liability Partnership (Second Amendment) Rules, 2018. The Ministry of Corporate Affairs (MCA) vide its Notification dated 18th September, 2018 introduced a revamped LLP-incorporation procedure which came into force from 2nd October, 2018.

Major highlights of the amended LLP incorporation process includes the introduction of specified LLP-RUN services (similar to RUN service for Company Incorporation) for Reservation of Name for the proposed LLP. Along with LLP-RUN, MCA also introduced Form FiLLiP i.e. Form for Incorporation of LLP. Form FiLLiP is similar to form SPiCe for Company Incorporation. 

3.1 LLP Incorporation Process

Stepwise procedure for the incorporation of new LLP is discussed as follows:

• Step 1: Procure Digital Signature Certificate

Every form or application is filed online with the MCA, which requires to be signed digitally by the applicants and partners of the LLP. Therefore, the DSC with validity of 2 years is procured for the Designated Partners of the Limited Liability Partnership. The DSC is associated with the PAN card of the application. It further requires passport size photograph and address proof.

• Step 2: Reserve LLP Name

The new process requires the applicants to file the web form named RUN-LLP (Reserve Unique Name – Limited Liability Partnership). The similar web form – RUN is already deployed to secure company’s name. RUN-LLP has replaced the old form LLP Form 1. The new form has been simplified that requires information related to the desired name, its significance and other basic details.

The application can be made with maximum 2 names in preference order providing their significance. The names must comply with the applicable provisions for name reservation. If none of the names is approved by the MCA, another chance is provided to apply two more names.

The government fees for RUN, as per Register Office Fees Rules, shall be Rs 1,000. DSC and DIN are not required for filing of RUN form for reservation of name but account of MCA portal is mandatory. Once the name is allotted for LLP, it is reserved for a period of 90 days from date of approval.

• Step 3: Preparation of Documents for Incorporation of LLP

After approval of name, LLP applicant is required to prepare the following documents:

1. 1. Proof of office address (Conveyance/Lease Deed/Rent Agreement etc. along with rent receipts)
   2. NOC from owner of the property
   3. Copy of utility bills (not older than 2 months)
   4. Subscription sheet including consent
   5. In case, a designated partner does not have a DIN, it is mandatory to attach: Proof of identity and residential address of the subscribers
   6. All the DPs should have digital signature
   7. Detail of LLP(s) and/or Company(s) in which partner or designated partner is a director/partner
   8. Copy of approval in case the proposed name contains any word(s) or expression(s) which requires approval from Central Government.

• Step 4: LLP Incorporation and DIN Application

The major change in the new process is this step and application. Earlier, the incorporation application was supposed to be filed in LLP form 2, which is now replaced with FiLLiP (Form for incorporation of Limited Liability Partnership). The most significant part is integration of DIN Allotment Application with incorporation application. Below mentioned are the features of the application:

1. 1. DPIN/DIN application for maximum 2 Designated Partners (DPs) can be made under the application. If there are more than 2 DPs who do not hold DIN, they can be added later by following respective filings.
   2. With this form, the application for name reservation can also be made. However, that is kept at the option of the applicants. The applicants can either choose to reserve name through LLP-RUN or under this form.

The application is accompanied with required documents including the subscriber’s sheet and registered office address proof. The e-form will be attested by the partners through PAN based DSC and certified by the practicing professional (CA/CS/CWA).

The application will be processed for approval by Central Registration Centre (CRC). If the registrar finds it necessary to call for further documents or information, he may do so by directing for re-submission within 15 days. Another opportunity of re-submission maybe provided after re-examination of application, which again has 15 days period. It is provided that the total period for re-submission of documents shall not exceed 20 days in total.

Upon approval of the application made for LLP registration online, the Certificate of Incorporation (CoI) will be issued in form 16 along with DPIN/DIN allotted to the Designated Partners. CoI will also consist of the Limited Liability Partnership Identification Number (LLPIN). The date of CoI will be the date of LLP incorporation since when it has come into legal existence. LLP is now entitled to commence business in its name.

• Step 5: Apply for PAN and TAN

Unlike the in case of company, the application for PAN and TAN is required to be made separately for LLP through offline or online mode. The applications are made directly to the Income Tax Department and also processed by it. The applications are made in forms 49A and 49B respectively with Certificate of Incorporation as supporting proof.

• Step 6: Drafting and Filing LLP Agreement

The next step will be to draft LLP Agreement carefully and based on the partners’ requirements. Step-4 and Step-5 both can be processed simultaneously, however, this step would take a little longer to complete than simply making the application.

3.2 Contents of LLP Agreement

The name of LLP, name and address of partners and designated partners, business object, place of business and all other essential details of LLP will be placed in the Agreement. Other clauses will be form of contribution and interest on contribution, profit sharing ratio, rights and duties of partners in case of admission, resignation, retirement, cessation and expulsion, proposed business, and rules for governing the LLP.

Once the LLP Agreement is reviewed and agreed upon by the partners, it will be executed by payment of stamp duty. The agreement will be executed by payment of stamp duty, which depends on the respective State Stamp Act where the registered office of the LLP is situated. Then with signature by partners and attestation by the witnesses, the agreement will be executed.

Notes:

• • The agreement must be filed with MCA within 30 days of date of incorporation. The delay leads to penalty of Rs. 100/day till the date of actual filing.
  • This is filed in LLP form-3 which remained same as was in the erstwhile process. Further, the verification and approval is processed by the concerned State RoC instead of CRC as in case of previous steps.
  • The name allotted under LLP-RUN will be reserved for a period of 90 days. If the LLP registration application i.e. FiLLiP is not filed in given period, the name will be expired which can be reserved through new application.
  • Only 2 DPIN/DIN can be allotted by through FiLLiP. In case, there are more than 2 DPs, the respective partners will be required to obtain DPIN/DIN by filing DIR-3 after incorporation. Then, the LLP need to carry on addition of Designated Partner or change in designation of Partner, as required.
  • Conclusive Evidence: The certificate of incorporation shall be the conclusive evidence that the limited liability partnership is incorporated by the name specified therein.
  • LLPIN: ROC assigns a Limited Liability Partnership Identification Number (LLPIN) for every LLP which is registered.

3.3 Incorporation Document (Sec. 11)

Section 11(1)(c) provides that a statement is required to be filed in the prescribed form along with the incorporation document. This statement shall be made by an advocate/chartered accountant/chartered secretary/cost accountant engaged in the formation of LLP as to legal compliance regarding incorporation.

3.4 Penalty

Section 11(3) provides for penalties for making statement by any person,

1. 1. knowing it to be false, or
   2. not believing it be true,

which shall not be less than ` 10,000 and may extend to ` 5,00,000 and also for imprisonment for a term which may extend to 2 years.

4. Registered Office of LLP and change therein (Sec. 13)

• Registered Office [Sec. 13(1)]. Every limited liability partnership shall have a registered office to which all communications and notices may be addressed and where they shall be received.
• Manner of Service of Document [Sec. 13(2)]. A document may be served on a limited liability partnership or a partner or designated partner thereof by sending it by post under a certificate of posting or by registered post or by any other manner as may be prescribed at the registered office. LLP is also entitled to declare any other address for the same purpose in form 12 in a manner as may be prescribed.
  • Note. Where the limited liability partnership agreement does not provide for such manner, consent of all such partners shall be required for declaring any other address as address for service of documents. [Rule 16(2)].
• Change of Registered Office [Sec. 13(3)] A limited liability partnership may change the place of its registered office and file the notice of such change with the registrar in form 15 and manner and subject to such conditions as may be prescribed and any such change shall take effect only upon such filing.

Notes

Where the limited liability partnership agreement does not provide for manner or conditions for change of registered office, consent of all partners shall be required for changing the place of registered office of limited liability partnership to another place [Rule 17(1)].

• • Where the change in the place of registered office is from one state to another state, the limited liability partnership having creditors shall also obtain consent of secured creditors [Rule 17(1)].
  • In such a case, LLP shall also publish a general notice, not less than 21 days before filing any notice with registrar, in a daily newspaper published in English and in principal language of the district in which R.O of LLP is situated and circulating in that district giving notice of change of R.O [Rule 17(4)].
• Penalty for Contravention [Sec. 13(4)]. If the limited liability partnership contravenes any provisions of this section, the limited liability partnership and its every partner shall be punishable with fine which shall not be less than ` 2000 but which may extend to ` 25,000.

5. Effect of Registration (Sec. 14)

On getting the certificate of registration from the registrar of companies, the LLP enjoys the status of body corporate and becomes a legal entity separate from its members. Such LLP is entitled to exercise the following rights :

1. 1. It can sue and be sued by others in its own name.
   2. It can acquire, own, hold, develop or dispose of property whether movable or immovable, tangible or intangible.
   3. It may have a common seal. Thus it is not mandatory for LLP to have a common seal.
   4. It can do and suffer such other acts and things as bodies corporate may lawfully do and suffer.

6. Provisions Relating to Name of LLP and changes therein (Secs. 15 – 21)

• • Last Words of Approved Name [Sec. 15(1)]. Every limited liability partnership shall have either the words “limited liability partnership” or the acronym “LLP” as the last words of its approved name.
  • No limited liability shall be registered by a name which in the opinion of the Central Government is undesirable.