UNDERSTANDING A LIMITED LIABILITY PARTNERSHIP

 A Limited Liability Partnership or LLP is an alternative corporate business form which offers the benefits of limited liability to the partners at low compliance costs. It also allows the partners to organize their internal structure like a traditional partnership. A limited liability partnership is a legal entity, liable for the full extent of its assets. The liability of the partners, however, is limited. Hence, LLP is a hybrid between a company and a partnership.

LEGAL BACKGROUND

Section 2(1)(n) of the Limited Liability Partnership Act, 2008 defining the Limited Liability Partnership is reproduced below:

“2(1)(n) “limited liability partnership” means a partnership formed and registered under this Act.”

 REQUISITES TO REGISTER A LIMITED LIABILITY PARTNERSHIP

Designated Partners– Every Limited Liability Partnership must have at least two individuals as designated partners. At any time, at least one designated partner should be resident in India. There is no maximum limit on the number of maximum partners in the

1. Limited Liability– According to Section 26 of the Act, every partner is an agent of the LLP for the purpose of the business of the entity. However, he is not an agent of other partners. Further, the liability of each partner is limited to his agreed contribution in the Limited Liability
2. Perpetual succession– Unlike a partnership firm, a limited liability partnership can continue its existence even after the retirement, insanity, insolvency or even death of one or more partners. Further, it can enter into contracts and hold property in its
3. Separate Legal Entity– It is a separate legal entity. Further, it is completely liable for its assets. Also, the liability of the partners is limited to their contribution in the LLP. Hence, the creditors of the limited liability partnership are not the creditors of individual
4. Mutual Agency– All partners are agents of the LLP and the actions of one partner do not bind the others.
5. LLP Agreement– The rights and duties of all partners are governed by an agreement between them. Also, the partners can devise the agreement as per their choice. If such an agreement is not made, then the Act governs the mutual rights and duties of all
6. Artificial Legal Person– For all legal purposes, an LLP is an artificial legal person. It is created by a legal process and has all the rights of an individual. It is invisible, intangible and immortal but not fictitious since it

STEPS TO REGISTER A LIMITED LIABILITY PARTNERSHIP WITH REGISTRAR OF COMPANIES

STEP I: OBTAINING DIGITAL SIGNATURE CERTIFICATE

The partners of the proposed entity shall have the Digital Signature Certificates (DSC) for the online filing of all the electronic forms (e‐forms) with the Ministry of Corporate Affairs, Government of India.

Digital Signature Certificates ensures the security and the authenticity of the documents submitted online. The DSCs are being issued by the Certifying Authorities having a validity of a maximum of three years.

STEP II: RESERVE THE NAME

 The proposed name of the LLP shall be reserved through the Reserve Unique Name (RUN) functionality of the MCA21.

STEP III: FILING OF INCORPORATION WITH ROC

 After the name is approved by MCA, Form FiLLip, which is an integrated form (a single application for the Incorporation of LLP, Allotment of Director Identification Number (DIN)) is required to be filed with the following documents in the prescribed format.

1. Directorship details for both the designated partners

 

2. Consent to act as Designated partners in prescribed format witnessed by professional along with declaration in Form 9

 

3. Certified True copy of Board resolution in case one of the partners is a nominee of a body corporate

 

4. Following documents relating to the registered office address the following documents are also required to be attached in the same form:

 

• Proof of registered office address viz, conveyance deed/Lease Deed/ Rental Agreement along with rent receipts (should not be older than 1 month);

 

• No Objection Certificate from the Landowner;

 

• Proof of evidence of any utility service like telephone, gas, electricity, etc. depicting the address of the premises in the name of the owner or document, as the case may be (which is not older than one month).

The ROC after satisfying himself of the legal compliance, issues the Certificate of Incorporation in which is a conclusive proof of the Existence of a LLP.

STEP IV: FILING OF FORM 3 FOR REGISTRATION OF LLP AGREEMENT

 The partners of the LLP need to enter into an agreement within 30 days of the LLP incorporation and get it registered with the ROC in Form 3. The agreement needs to be executed on a Rs. 2000/‐ stamp paper (as per the Karnataka Stamp Act). The Agreement will lay down all the terms and conditions, mutual rights and obligations, carrying of business operation, duties and responsibilities and other management procedures.

POST INCORPORATION ACTIVITIES

 Obtaining licenses such as GST, PF, ESI as may be applicable

• Opening of Indian Bank Account

 

• Obtaining FIRC from the Reserve Bank of India

 

• Filing of FC‐GPR with the Reserve Bank of India

 

• Appointment of First Statutory Auditors of the