Limited Liability Partnership (LLP) is combination of Partnership and Company and is governed by Limited Liability Partnership Act, 2008. LLP is a special partnership that gives protection to each partner against any negligence on the behalf of the other partners.
Advantages of LLP
1. Liability Protection: The liability protection that comes with a LLP is a big advantage. The individual partners are not held personally responsible for any company debts or obligations. Any lawsuit or claim against the company cannot be held against the partners, protecting personal assets.
2. Flexibility: Partners have flexibility within business ownership under a limited liability partnership. Each partner in the business has the ability to decide how much they want to contribute and how much of a partner they truly want to be in the business. They are also not obligated to participate in business meetings or consultations with anyone that they do not feel the need to.
3. Tax Advantages: The individuals in the partnership are liable for filing their personal income taxes as well as self employment taxes for the Internal Revenue Service. The partnership is not held responsible for paying these taxes. The credits and deductions of the company are divided among the partners according to the amount of interest in the company.
Procedure of LLP Incorporation
Obtain a Digital Signature Certificate from Authorized DSC issuing Authority.
Documents required for obtaining DSC :
Proof of Identity
Proof of Residence
One self attested passport size photograph
Application to be made in Form DIR-3 for obtaining the DIN no. of the Directors after obtaining the DSC.
Documents required for obtaining Director Identification Number:
After obtaining the DIN No. register the DSC on MCA portal in the name of Designated Partner/Director. In MCA portal go to MCA services-DSC Services-Register DSC.
Name Approval (Form 1)
Apply in Form INC-1 for Name approval of the Proposed LLP after finalizing the nature of business of the proposed LLP. Maximum Six names can be given in order of preference. CRC will approve the available and suitable name among the given names for the proposed LLP.
Note: Applicants can themselves check the available names in MCA Website under the head MCA Services: Check LLP Name.
Once name of the proposed Company is approved, it remains valid for 3 months from the date of approval. Within the period of the said 3 months, LLP has to be incorporated otherwise again name approval in LLP Form 1 is required to be filed with MCA.
Requirements for filing LLP Form 1
Proposed business activity filled in LLP form 1 will be prefilled in LLP Form 2 i.e incorporation form. Applicants are advised to finalise the business activity of LLP before filing LLP Form 1.
Proposed monetary value of partner's contribution
Once proposed monetary value of partner's contribution has been filled and filed in Form 1, the monetary value of contribution in Form 2 should not be less than the value mentioned in form 1.
For example: if partner's contribution in Form 1 was mentioned as Rs. 20 Lacs and after approval of Form 1, partners want to change and reduce the LLP contribution to Rs. 10Lacs, is not permissible. The Contribution can be more than the contribution stated in LLP Form 1 but cannot be less than contribution mentioned in LLP Form 1.
In case the Designated Partner is nominee of a body corporate, select the type of body corporate. Enter the corporate identity number (CIN) or foreign company registration number (FCRN) or Limited Liability Partnership Identification number (LLPIN) or Foreign Limited Liability Partnership Identification number (FLLPIN) or any other identification number, as applicable.
Details of minimum two designated partners of the proposed LLP, one of them must be a resident of India, is required to be filled in the application for reservation of name. Only individuals or nominees on behalf of the bodies corporate as partners can act as designated partners.
Ensure that correct details have been provided as the same shall be automatically pre-filled in Form 2 for incorporation of LLP.
LLP Form 2 (Incorporation Document and Subscriber's Statement)
LLP Form 2 within 3 months from the date of approval of LLP Form 1
Mention Total Number of Partners and Designated Partners. Fill up details of same. Enter the amount of proposed monetary value of partner’s contribution in figures and system will automatically display the amount in words. Attach details in respect of names of partners/ nominees/ witnesses and their signatures in the format as Subscribers’ sheet attachment. Attach proof of register office address of LLP. An individual has to give prior consent to become a designated partner and LLP to file consent in format prescribed. Select the state and office of registrar in which registered office of the proposed LLP is to be situated.
In case the name includes banking, insurance, venture capital, mutual fund, stock exchange, Chartered Accountant, Company Secretary, Cost Accountant, Advocate, CA, CS, CWA, asset management, non banking financial, architect, merchant bankers, chit fund, securitization and reconstruction etc, a copy of the in-principle approval of the regulatory authority or council governing concerned profession should be attached with Form 2
Pay the prescribed registration fee as per LLP Rules, based on the total monetary value of contribution of partners in the proposed LLP
On submission of complete documents the Registrar after satisfying himself about compliance with relevant provisions of the LLP Act will register the LLP and will issue a certificate of incorporation
Drafting of LLP Agreement
LLP agreement has to be drafted line with LLP Act. It is not mandatory to file LLP agreement at the time of registration and same can be file within 30 days. Designated partners are responsible for doing all acts, matters and things that are required to be done for complying with the provisions of the LLP act. They are liable to all penalties imposed on the LLP. So it is very important to draft LLP agreement with professional help.
The following clauses are important to be incorporated in agreement:
Filing of Form 3 – LLP Agreement
The LLP agreement has to be uploaded. Once it gets approved all the formalities for registration gets completed.
Note: Form 3 has to be uploaded within 30 days of incorporation of LLP otherwise penalty is Rs. 100/- per day.
Contact ADCA, one of the leading providers of Company registration services in Bangalore.