LIMITED LIABILITY PARTNERSHIP (LLP)

Limited Liability Partnership

A limited liability partnership (LLP) is a corporate body and legal entity separate from its partners. It acquires the status of an independent legal entity only after incorporation. An LLP may hold, acquire or dispose of any tangible asset after registration. It can complain about others and can be sued in its own name. The requirements for the formation of a new LLP, the LLP's registered office and regulations regarding changes, approvals, name maintenance and changes are discussed in this chapter.
Significant changes have been made to the LLP Incorporation Regulations regarding Limited Liability Partnership (Second Amendment) Rules, 2018. With respect to the September 18, 2018 notice, the Ministry of Corporate Affairs (MCA) has introduced an updated LLP Incorporation Procedure. It came into effect on October 2, 2018.
The main highlights of the modified LLP incorporation process include the introduction of a specific LLP-RUN service (similar to the company-established RUN service) for the proposed LLP name booking. In addition to LLP- RUN, MCA has also introduced Form FiLLiP, or Form for Incorporation of LLP. The FiLLiP module is similar to the SPiCe for Company Incorporation module.

Benefits of Limited Liability Partnership

Limited Liability

LLP members are only liable for the small amount of debt incurred by them. On the other hand, for proprietorships and partnerships, the personal assets of the directors and partners are not protected in case of bankruptcy of the company.

Separate Legal Entity

LLP is a separate legal entity from its partners. It has an uninterrupted existence that follows perpetual succession, i.e., the partners might leave, but the business remains. The terms of the dissolution must be mutually agreed upon before the company is dissolved.

Flexible Agreement

It's also easy to transfer ownership of an LLP. Individuals can easily be incorporated as designated partners and ownership is passed on to them.

Suitable for Small Businesses

LLPs with capital below Rs 25 lakhs and annual turnover below Rs 40 lakhs do not require any formal audit. Therefore, registration as an LLP is beneficial for small businesses and startups.

Procedure of Limited Liability Partnership

Obtain Digital Signature Certificate

Any form or application submitted online to MCA requires a digital signature of LLP applicants and partners. Hence, 2- year DSC is provided to the designated partners of the Limited Liability Company. The DSC is linked to the PAN card of the application. It also requires passport photos and address proof.

Reserve the LLP Name

The applicants need to submit the web form called RUN- LLP (Reserve Unique Name - Limited Liability Partnership) for the new process. The same web module - RUN has already been distributed to protect the company name. Run-LLP has replaced the old LLP Form 1. The new form has been simplified and requires information about the desired name, its meaning and other basic details. The program can be made with a maximum of 2 names in a preferential order stating their importance. The names should follow the name reservation rules. If none of the names is approved by the MCA, there is another opportunity to request two more names. The official fee for the run is 1000 rupees as per rules. DSC and DIN are not required to submit Run Name Booking Form but the MCA portal account is required. Once the name is assigned to the LLP, it is conducted for 90 days from the date of approval.

Prepare Documents for LLP Incorporation

Once the name is approved, the LLP applicant will need to prepare the following documents:

Proof of address (Conveyance/Lease Deed/Rent agreement with rental receipt, etc.)
Owner's Certificate of No Objection (NOC)
Copy of water and electricity bills (within 2 months)
Subscription form with consent
If the Designated partner does not have a DIN, the following must be attached: Proof of the subscriber's identity and address
All DPs must have a digital signature
Details of the LLP and/or company for which the Partner or Designated Partner is director/Partner
A copy of the endorsement if the proposed name contains words or phrases that require central government approval.

LLP integration and DIN application

The main changes in the new procedure are these steps and their application. Previously, incorporation applications had to be submitted as LLP Form 2, which has now been replaced by FiLLiP (Incorporation Form for Limited Liability Partnership). The most important part is the integration of DIN assignment applications and integration applications. The features of the application given below are: DPIN/DIN applications can be submitted for up to two Designated Partners (DPs) per application. If there are more than two DPS that don't have DIN, they can be added later according to their map. You can also use this form to request a name reservation. However, this depends on the choice of the applicant. Applicants can reserve a name through the LLP run or through this form. The application includes the required documents as well as a customer file and a proof of registered office. Electronic forms are verified by participants through a PAN-based DSC and certified by a practice expert (CA/CS/CWA). Applications are processed for approval by the Central Registration Center (CRC). If Registrar deems it necessary to request additional documentation or information, it may request a resubmission within 15 days. Another possibility of re-application may be offered after application review with a 15-day deadline. The total time for document resubmission is not expected to exceed 20 days. Upon approval of the online LLP registration application, a Certificate of Incorporation (CoI) on Form 16 containing the designated DPIN/DIN will be issued to the nominated partner. A CoI also consists of a Limited Liability Company Identification Number (LLPIN). The date of the CoI is the establishment date of the LLP as it legally existed. The LLP currently reserves the right to start a business under that name.

Apply PAN and TAN

Unlike in the case of a company, PAN and TAN applications must be submitted to the LLP separately in offline or online mode. The application is presented directly to the Revenue Agency and processed by the Revenue Agency. The application will be submitted on forms 49A and 49B respectively and will use the certificate of incorporation as proof.

Draft and file LLP contract

The next step is to carefully create an LLP contract based on the needs of your partner. You can process both steps 4 and 5 at the same time, but this step takes a little longer than a simple application.

Documents Required for Limited Liability Partnership

LLP Partners

As a proof of Identity:

PAN card or Passport (foreigner or NRA)
Aadhar Card / Voter ID / Passport / Driver's license
Latest Bank statement / Telephone bill / Mobile phone bill / Electricity bill / Gas bill
Passport size photo
Blank document with specimen signature.

Note: One of our partners will need to self-attest the first three documents. For foreigners or NRAs, all documents must be notarized (if currently in India or a non- commonwealth country) or notarized (if from a commonwealth country).

Registration Office

As a proof of Identity:

Utility bills
Notarized rental agreement in English
NOC from the property owner
Sale deed or property deed in English (in case of owned property)

Eligibility Criteria of Limited Liability Partnership

Minimum of Two Partners

A minimum of 2 partners is required to form a LLP (no upper limit).

Upon Contribution

Each partner must make an agreed upon contribution to the shared capital.

Minimum Authorized

The LLP requires a minimum authorized capital of Rs 1,00,000.

One Designated Partner

At least one Designated Partner must be a resident of India.

FAQs

Q. How many people are required to incorporate an LLP?

A Limited Liability Partnership must have a minimum of two Partners and an LLP can have any number of Partners.

Q. How to be a Partner in an LLP?

The designated Partner must be a natural person who is above 18 years of age. LLP Act 2018 allows a foreign national including Foreign Companies to incorporate an LLP in India, provided at least one designated partner is Indian.

Q. How much capital is required to start a Limited Liability Partnership?

An LLP can be started with any amount of money there is no such minimum requirement. A partner may contribute both tangible and intangible property.

Q. How long does it take to incorporate an LLP?

The time taken for incorporation depends on the submission of relevant documents by the client as well as the Approvals from the Government authorities. Legal Gyane can help you Incorporate an LLP in 14-20 days.

Q. Can NRIs/ Foreign Nationals be designated partners in LLP?

An NRI can be a designated partner in a Limited Liability Partnership if he has a Designated Partner Identification Number. However, at least one Designated Partner in the LLP must be a resident Indian.

LIMITED LIABILITY PARTNERSHIP (LLP)