Limited Liability Partnership (LLP) was introduced in India by way of the Limited Liability Partnership Act, 2008. The basic premise behind the introduction of Limited Liability Partnership (LLP) is to provide a form of business entity that is simple to maintain while providing limited liability to the owners. Since, its introduction in 2010, LLPs have been well received with over 1 lakhs registrations so far until September, 2014.
Limited Liability Partnership (LLP) is an alternative corporate business form that gives the benefits of limited liability of a company and the flexibility of a partnership business, In other words it offers benefits of both worlds by bringing simplicity in management and scope of expansion like that of a company. The compliance requirements are relatively less and only few returns have to be filed. For small LLP the audit Is not required and the compliance is based on the information declared by the partners. A Limited liability Partnership (LLP) is a new form of business introduced in the year 2009, this is a unique form of business in the sense that it has simplicity of a partnership firm and benefits of limited liability as in a limited corporation. Minimum two person can form an LLP with no maximum limit on the number of its partners. The advantage of llp form of business over a private limited is in the fact that there is less compliance requirement in comparison to a private limited company. For instance audit is not required till the time turnover reaches 40 lac or capital reached Rs. 25 lac. This is preferred choice for small businesses with less capital
Process of Limited Liability Company Registration
1. Digital Signature of Partners
DSC is the equivalent of physical or paper certificates in digital format. As the application for LLP registration is filed online with Digital Signatures of the designated partners, hence the process starts with the issuance of the digital signature for all the designated partners. Photo, ID and Address proof is to be submitted along with Form for issuance of DSC
2. DIN Number allotment for the Partners
It is a permanent number issued by the registrar of companies, as a unique identification number to the director of a company or designated partner of the LLP. No person can hold an office of the designated partner unless he is issued a DIN. For allotment of DIN, an application to ROC is made with Photo, Attested ID and Address proof duly attested by CA, CS or CMA
3. Approval of name for the LLP by the ROC
Name of each company or LLP must be unique, new and should not be same or similar to an already registered company, LLP or a Trademark. After the DSC and DIN allotment, an application is made to the ROC for approval of name; the registrar is vested with discretionary powers concerning approval of name. Our advisors shall be a help to you while deciding the name of the company or LLP.
4. Issuance of Registration Certificate of LLP
All the steps as described below finally culminates into the registration of the company with the issuance of the certificate of Incorporation. With spice e-form, DIN, name Approval and Incorporation related documents like affidavits; declarations are filed at once. However, only one name can be suggested in the spice form. The certificate of incorporation is the conclusive proof of the registration of the company.
5. LLP Agreement drafting and Filing with the ROC
The partners of the LLP bind themselves concerning their mutual rights and obligation, capital contribution ratio, profit sharing ratio in a document which is known as LLP Agreement. After incorporation of LLP the partners need to execute the same and file a copy with the registrar of companies within 30 days of Incorporation, failing which a penalty of Rs. 100 day is imposed for each day of delay.
6. PAN, TAN Number of LLP & Bank A/c Opening
Income tax Department allots a unique 10 Digit alpha numeric number as a permanent account number, also known as PAN Number. To comply with TDS provisions every tax payer need to obtain a Tax Deduction Account Number. These identification numbers are essential to operate and comply. The opening of a bank account is the last step in setting up a business
Advantages of Limited Liability Partnership Registration
1. Separate Legal Entity
An LLP is considered as a separate legal entity different from its owners or promoters. It has its distinct name and is creation of law. Being separate from its promoters / owners / partners it can do business in its own name. However, the LLP has to act through its designated partners and in the manner which is provided in the LLP agreement.
2. Capacity to Sue or be Sued
The disputes can arise in the course of business and for the resolution of the same the LLP can sue any person against which it has grievances or seek judicial intervention. The case by LLP can be filed in the name of LLP only through its authorized representative. Similarly, others can sue the LLP in its name. Thus it has capacity to sue or be sued in its own name.
3. Property Ownership
As the Limited Liability Partnership is a distinct entity, it enjoys the right to own, enjoy and transfer property. The rights can be exercised by the LLP in its own name, the stamp duty shall also be payable / paid by the LLP himself. The partners on its own can't transfer the property or create any third party rights whatsoever on the LLP property.
4. Uninterrupted Existence
LLP being creation of law can be closed only by following the due process of law. The life span of LLP is thus independent of the life of its partners. The death of one partner or all partner does not bring end to the LLP, the legal heirs of the dead partners becomes the partner(s) in their place. Thus the LLP goes on until it is formally closed down by following laid down procedures.
5. Limited Liability Partnership
As said earlier the LLP is separate legal entity hence its liabilities can't be shared by anyone but the LLP himself. The partners are not liable for the debts or other liabilities of a LLP, the partner's liability is limited to the unpaid amount of contribution (capital) which they have promised to bring in while incorporating the LLP of through LLP agreements in future.
6. Borrowing Capacity
Borrowing from banks, financial institutions and others lenders is possible by the LLP in its own name. The credit worthiness of LLP is decided by the financials of the LLP itself and financials of partners are not relevant for deciding the eligibility of LLP for borrowing. The LLP can also raise funding from private parties.
Features of Limited Liability Partnership
- Just Require 2 Entrepreneurs.
- More Credibility than Partnership Firm.
- Limited Liability is main feature.
- Partnership Firm's Next Version in Simply Words.
Disadvantages of Limited Liability Partnership
- Difficult to Get VC and Angel Funds as Compare to Private Limited.
- Less Features as Compare to Pvt Ltd Company.
- Mixture disadvantages of Partnership Firm
DOCUMENTS REQUIRED FOR LLP REGISTRATION
1. Copy of PAN Card of partners
2. Passport size photograph of partners
3. Copy of Aadhaar Card/ Voter identity card
4. Copy of Rent agreement (If rented property)
5. Electricity/ Water bill (Business Place)
6. Copy of Property papers (If owned property)
7. Landlord NOC (Format will be provided)