It is a new corporate form that enable professional expertise and entrepreneurial initiative to combine, organize and operate in an innovative and efficient manner. It provides flexibility suited to the requirements of service, knowledge and technology based enterprises. It will not impose detailed legal and procedural requirement as needed in case of companies. Why is LLP required for business community
1. Partnership is not a legal entity separate from its partners, while LLP is a legal entity separate from its partners. 2. Firm is governed by Indian Partnership Act 1932, while LLP is governed by Limited Liability Partnership Act 2008. 3. Liability of the partner is unlimited under Indian Partnership Act while in the case of LLP, the liability of the partner is limited to the extent of their capital contribution/ commitment. 4. A partnership firm does not have perpetual succession but in the LLP act 2008, A LLP has perpetual succession. 5. In case of partnership the property of the firm belongs to partners who are collectively entitled to it but in case of an LLP the property belongs to the LLP and not to the partners individually. 6. Maximum no. of partners are specified under the Indian Partnership Act, 1932 but there are no bar for maximum no. of partners under Limited Liability Partnership Act 2008.
I. Memorandum and Article of Association is required in case of company under Companies Act,1956. while in case of LLP, only partnership agreement is required. II. The members are not agents of the company, in LLP the partner is an agent of the LLP. III. There are less complicated procedure regarding Audit of accounts in LLP in comparison with company. IV. A company must have a common seal but in case of LLP it’s optional.
Minimum of 2 partners will be required for making LLP. Appointment of at least two “Designated Partner”. Designated partner shall also be accountable for all regulatory and legal compliances, besides their liability as partner, per-se. An Incorporation Document which shall be subscribed by those two partners is required to be delivered to the Registrar of Limited Liability Partnership (ROLLP). Every LLP shall have a registered office and Contents of LLP agreement, as may be, shall also be required to be filed with ROLLP at the time of filing of LLP incorporation document.
The mutual rights and duties of partners inter se and those of LLP and its partner shall be governed by the agreement between partners or between the LLP and the partners. This Agreement would be known as “LLP Agreement”. As per the provisions of the LLP Act, in absence of any LLP agreement,the mutual rights and duties shall be as provided for under Schedule I of the Act. Therefore, in case any LLP propose to exclude provisions/requirement of Schedule I to the Act, it would have to enter into an LLP Agreement, specifically excluding applicability of any or all paragraph of Schedule I
Procedure to be followed for to start the LLP - Acquire Designated Partner Identification No. Acquire Designated Partner Identification No. AND Acquire Digital certificate Acquire Digital certificate Register DPIN, DSC Register DPIN, DSC With LLP Check Name Availability Download LLP Forms LLP Forms File Electronically Track Status Receive Certificate from Receive Certificate fromROC Limited Liability Partner is Able to Function
Every LLP have at least two Designated partners who are individual and at least one of them shall be a resident in India. Every designated partner of a LLP will obtain a Designated Partner Identification Number (DPIN) from Central Government. In form no.-7 of LLP act 2008. Prior consent of designated partner is required for his appointment as designated partner. LLP will be required to appoint a designated partner within 30 days of a vacancy, if any.
Every individual or nominee of a body corporate shall make a application electronically in Form 7 to the Central Government for obtaining Designated Partner’s Identification Number (DPIN). Following process shall be followed to obtain the DPIN :- (i) Login website of Ministry of Corporate Affairs. (ii)The applicant shall access the Form 7 from the portal, fill-in the required particulars and submit the form electronically.
1. The Limited Liability Partnership will be required to maintain such proper books of accounts as may be prescribed relating to its affairs for each year of its existence according to prescribed accounting principles and shall maintain the same at its registered office for such period as may be prescribed. 2. Every LLP shall be required to prepare a Statement of Account and Solvency within a period of 6 months from the closure of each financial year, and the same shall be signed by the designated partners and will be filed to the ROC, LLP within prescribed time and fee.
The LLP Act contain enabling provision pursuant to which a Firm, Private company or unlisted public company would be able to convert themselves into LLPs. Provision of clause 58 and Schedule II to Schedule IV to the Act provide procedure in this regard. LLP would not be allowed to convert itself into company under LLP Act. However, enabling provisions would be required to be made in the Companies Act for such conversion. Necessary action in this regard would be taken when Companies Act would be revised.
Winding up of LLP may be either voluntary or by the order the National Company Law Tribunal(NCLT) and LLP so wind up may be dissolved. In the following circumstances, LLP may be wound up by Tribunal:- (i) If LLP SO DECIDES that it should be wound up by Tribunal. (ii) If the number of PARTNERS IS REDUCED below than 2 and LLP carries its business more than 6 months. (iii)If LLP is UNABLE TO PAY ITS DEBTS.