As the name implies, a Limited Liability Partnership is one in which all or some of the partners bear limited liability. In India, the concept of a Limited Liability Partnership (LLP) was first enacted in 2008. An LLP consolidates the upsides of a partnership firm and a company. However, there is no limit on the maximum no. of partners.
FEATURES OF LLP
- Separate legal entity.
- Perpetual succession.
- LLP is a lawful substance.
- Less compliance and regulations.
- It’s a Mutual agency.
- Each partner’s liability is limited.
LLP REGISTRATION PROCESS
The registration process under LLP consists of 5 steps. To start with, we will see the documents required under this process cycle.
- PAN/ ID Proof of the partners: PAN card serves as a primary form of identification. All the partners need to provide their PAN at the time of registration.
- Address Proof: The partner needs to submit any of these accompanying documents like Driver’s license, Aadhar Card, Voter’s ID.
- Residence Proof: Any one of these documents should be submitted as residence proof like telephone bill, mobile bill, electricity bill, latest bank statement.
- Photographs of the partners.
- Passport in case of NRI’s and Foreigners.
STEPS FOR REGISTRATION
STEP 1: Obtain Digital Signature Certificate
Before the process of registration is initiated, one must apply for the digital signature of the delegated partner of the registered LLP. This process is necessary as all the documents for LLP are filed online and are required to be signed digitally.
This is required since all of the LLP’s paperwork must be filed online and signed electronically. All forms filed electronically on the MCA portal must be digitally signed by a DSC.
STEP 2: Applying for Director Identification Number
DPIN must be obtained for all partners or those who intend to be designated partners in the proposed LLP. When submitting Form DIR-3, the partner must include proof of identity and proof of residence. All designated partners or those intending to be designated partners of such proposed LLP should apply for a DIN.
The form must be accompanied by certain documents (PAN/Aadhaar).
STEP 3: Name Approval
LLP-RUN is filed to reserve the proposed LLP’s name, which will be processed by the Central Registration Centre under non-STP. Based on the search criteria entered, the system will generate a list of names that are nearly identical to those of existing companies/LLPs. This aids in the selection of names that are distinct from those already in use. The registrar will only approve the name if he is convinced with the same and the name doesn’t bear a resemblance to an already existing LLP or partnership firm.
Once the applicant has approved a name, he can begin the process of incorporating the LLP before the legitimacy of the approved name expires.
STEP 4: Incorporation of LLP
- The FiLLiP form must be submitted to the registrar with jurisdiction over the state. Fees must be paid following Annexure “A.” If an individual does not have a DPIN or DIN, this form also allows for the allocation of a DPIN.
- Only two people are permitted to make an application for allotment.
- The reservation application is also made through FiLLiP.
- If the applied-for name is approved, the approved name must be filed as the proposed name for LLP.
STEP 5: LLP agreement
The LLP agreement must be filed in Form 3 on the MCA Portal. The agreement’s Form 3 must be filed within 30 days. The contract must be printed on stamp paper. The value of the stamp paper may differ from one state to the next.
If no agreement is signed, the LLP will be governed by the Act’s First Schedule. An LLP’s agreement is printed on Stamp Paper, which has a fee structure. The fee structure listed on the MCA Portal is as follows:
- Fee of Rs. 100 for an LLP with a contribution of between Rs. 1 lakh and Rs. 5 lakh.
- Fee of Rs. 150 for an LLP with a contribution of between Rs. 5 lakh and Rs. 10 lakh.
- Fee of Rs. 50 for an LLP with a contribution of less than Rs. 1 lakh.
- A fee of Rs. 200 is charged to an LLP with a contribution of more than Rs. 10 lakh.
QUALIFICATION OF A FIRM
Some certain rules and regulations have to be fulfilled for the firm to qualify for registration criteria.
Any business which fulfills these conditions:
- There is no limit to the maximum number of partners but a minimum of 2 partners are required to form an LLP.
- If a body corporate is a business partner, one should nominate as a normal person.
- Each partner must have a contribution towards the business, no such capital requirement is necessary.
- The authorized capital of at least Rs 1 Lakh is necessary for LLP. There is no such minimum capital requirement.
- One partner should be an Indian resident.
- All partners must have their DPIN.
- All partners should have DSC.
- LLP office should have an address proof and NOC if rented.
FACTORS TO KEEP IN MIND WHILE NAMING THE LLP
- Unique Component
The LLP name should have an Alphabeta component so that the same name is not provided to any other LLP business.
The names unless approved by RBI or SEBI will be rejected. Generic terms, abbreviations, and adjectives will also be rejected.
- Different Trademark
There should be no registered trademark by the same name. Unless one obtain NOC on that name.
- Pictorial Component.
Having research in the business name is prohibited if one is in the Restaurant or Logistics business
A Limited Liability Partnership is a corporate structure that protects individual partners from the joint obligation of the other partners in the firm, and they are only liable for their share of the liability since their liability is limited; it does not consider the members’ personal assets. In the same way that shareholders in a corporation have limited liability, some partners in an LLP have limited liability.
In addition, an LLP differs from a corporation in that its partners operate the business directly, whereas, in a corporation, shareholders pick a board of directors to carry out the main functions. In terms of taxation, LLPs are considered the same as any other partnership firm.
Authors Name: Sakshi Hedau & Girisha Jain (Chandigarh University)