A Limited liability partnership (LLP) is a body corporate formed and incorporated under the LLP Act, 2008. It offers the benefits of limited liability of a company to its members. An agreement between the partners governs the rights and the duties of the partners called the LLP agreement. An LLP agreement is a written agreement between the partners of an LLP or the LLP and its partners.
The partners can make an LLP agreement as per their choice. If an agreement is not made between the partners then the LLP Act governs the mutual rights and the duties of the partners. In an LLP every partner is an agent of the LLP though one partner is not an agent of other partners. The liability of each partner is limited by the agreed contribution to the LLP.
The advantages of a LLP are that it exists as a separate entity. In a LLP, the partners are not liable for the company’s losses. The partners have the right to directly manage the business. If there is only one partner in a LLP then the sole partner can find another partner without dissolution. An LLP can raise funds from partners, banks and NBFCs.
An LLP should have at least 2 members designated as partners. One of the designated partners should be a resident Indian. An LLP can have more than 2 partners and there is no upper limit. An LLP can continue to exist even after retirement and the death of one or more partners. It can enter through contracts and can hold property.
LLP is a well-known business structure worldwide and is also very popular. Agencies prefer dealing with an LLP rather than a normal partnership. If you are planning to start an LLP then getting it registered is mandatory in India.
Process for registering your LLP
The registration process for LLP is as follows:
- The process requires that you first get the name of your LLP approved. You can fill in the e-form called RUN-LLP (Reserve Unique name – Limited Liability Partnership). You need to enter information like the name, its significance and other basic details.
- The application can be made with a maximum of 2 names in the preference order and explaining the significance. If none of the names get approved then you will have to apply again. Once a name is allotted it is reserved for 90 days from the date of approval.
- Once your name is approved you have to prepare documents like proof of office address, NOC from the owner of the property and a copy of utility bills not older than 2 months. You will have to give details about which partner is a director/partner.
- You will have to apply for a DIN (Director Identification Number) for a maximum of 2 partners. All the designated partners will require DSCs (Digital Signature Certificates). You can apply for a Class 2 or Class 3 digital signature certificate from an authorised certifying agency.
- Now you will need documents like a subscriber’s copy which has to be signed by all the partners. You also require the registered office address proof. The e-form will be attested by the partners using PAN-based DSC and certified by a practising professional (CA).
- The application is processed for approval by the Registrar of Companies. If all the documents are right then the registrar will issue a Certificate of Incorporation. It will also contain the DIN allotted to the designated partners. You will also get a LLPIN (Limited Liability Partnership Identification Number).
- The LLP is registered and has come into legal existence. It can now commence business in its name. The LLP can get the status of a body corporate. The Incorporation certificate is conclusive evidence that the LLP is incorporated by the name specified therein.
You can get your LLP incorporation done online through the companies that provide such services. You only have to fill in an online form to start the LLP registration process. The experts from the company will get in touch with you to complete the legalities and the process. You need not worry about filling out forms and applying as everything is taken care of by the experts. The company can help you get your LLP Incorporation certificate within 15 days.
Benefits of registering an LLP
When you register your LLP in India you can get the following benefits:
- The LLP can acquire, own, hold, develop or dispose of property whether movable or immovable.
- It can sue or get sued by others in its name.
- The LLP can have a common seal though it is not mandatory.
- It can do and suffer acts as a body corporate may lawfully do and suffer.
- Many times businesses take things on credit and in the case of a normal partnership personal savings and property would be at risk if the business cannot pay its loans. In the case of an LLP, only the investment needed to start a business is lost and the personal assets of the partners are safe.
- LLP is ideal for small enterprises as it is easy to manage and a statutory audit is not required. A tax audit is also not required with a capital contribution of less than 25 lac and a turnover not exceeding 40 lac.
Advantages of LLP
The following are the advantages of an LLP:
- You do not need a minimum capital requirement for an LLP.
- LLP is not required to maintain any registers or records unless specifically stated in the LLP agreement.
- The working partners can take the remuneration as per the LLP agreement. It is also possible for a partner to reduce the contribution liability after giving notice to the creditors.
- Partners can delegate the management power to a management team or a single partner.
- It is possible to remove a partner from an LLP subject to the LLP agreement.
- A partner continues as a partner in an LLP even after transferring all the rights unless the LLP agreement states otherwise. A partner can even resign from an LLP.