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An increasing number of entrepreneurs are choosing to form Limited Liability Partnerships (LLPs), which combine the advantages of both a partnership firm and company into one. There are similarities between a partnership firm and a corporation in the features of LLPs in India are governed by the Limited Liability Partnership Act, 2008. A LLP must have at least two partners in order to be The maximum number of partners in an LLP, on the other hand, is unrestricted.
There should be a minimum of two authorised partners who must be individuals, at least one of them must be a resident of India. The LLP agreement governs the rights and responsibilities of chosen partners. They are directly accountable for ensuring that the provisions of the LLP Act, 2008 and the LLP agreement are followed.
If you wish to form a company as a Limited Liability Partnership, you must register it under the Limited Liability Partnership Act of 2008.
| FORM NAME | PURPOSE OF THE FORM |
|---|---|
| Form 5 | Notice of a name change |
| Form 18 | Conversion of a private company/unlisted public company into an LLP application and statement |
| Form 17 | Application and statement for a firm's conversion to LLP |
| RUN (Reserve Unique Name-Limited Liability Partnership) | This form is used to reserve a name for the LLP |
| FiLLiP | Form for incorporation of LLP |
Partners with limited liability
An LLP's partners are only liable to a certain extent. This means individuals are only responsible for the amount of contributions they make. They are not individually liable for any losses incurred by the company if it becomes insolvent during the winding up process. Due to the fact that the partners have no personal responsibilities, they are able to conduct business in a credible manner
Distinctive Legal entity
An LLP, like a company, is a separate legal entity. A limited liability partnership (LLP) can sue and be sued in its own name. Contracts are signed in the LLP's name, which aids in gaining the trust of numerous stakeholders. Customers and suppliers will have more faith in the company as a result of this.
Absence of any minimum capital contribution requirement
There is no minimum capital requirement for forming an LLP. Before incorporating, there is no requirement to have a minimum paid-up capital. It can be founded with whatever amount of capital that the partners contribute.
Less compliance at a low price
In comparison to founding a public or private limited company, the expense of forming an LLP is modest. According to the law firm's website, the LLP's compliance requirements are also minimal. It simply needs to file two statements per year: an annual return and a statement of accounts, as well as a statement of solvency.
LLP dissolution and winding up
An LLP must have at least two partners to be formed. The LLP will be dissolved if the minimum number of partners is less than two for six months. If the LLP becomes unable to pay its debts, it may be liquidated.
Capital-raising Difficulties
Like a business, the LLP does not have the concept of equity or shareholders. However, angel and venture capitalists are not allowed to become shareholders in the LLPs. This is due to the fact that the shareholders must be LLP partners and must assume all of the responsibilities of a partner. As a result, angel investors and venture capitalists prefer to invest in a firm rather than an LLP, making it difficult for the latter to raise funds.
Noncompliance carries a penalty.
Every year, the LLP must file returns with the Ministry of Corporate Affairs (MCA). A significant penalty will be imposed on the LLP if it fails to file the returns. The amount of compliance an LLP must follow is little, but if these compliances are not done on time, the LLP will be fined heavily.
Before beginning the registration process, you must first obtain the digital signatures of the new LLP's designated partners. All LLP documentation must be digitally signed and must be filed online. Digital signature certificates must be obtained from government-approved authorities by the chosen partner. The price of DSC varies based on the certification agency.
Form DIR-3 must be used to apply for a Director Identification Number (DIN). The document must be signed by a Company Secretary who is employed full-time by the company or by the existing company's Managing Director/Director/CEO/CFO.
On behalf of the proposed Limited Liability Partnership (LLP), the Central Registration Centre will process the RUN-LLP (Limited Liability Partnership-Reserve Unique Name) form. Only if the name is not objectionable in the eyes of the Central Government and does not resemble any existing partnership firm or LLP will the registrar accept it.
A Limited Liability Partnership is formed by filing a FiLLiP (Form for incorporation of Limited Liability Partnership) with the Registrar of the state in which its registered office is located. In addition, this form allows the designated partner to apply for an allocation of DPIN if he or she does not have one.
It governs the partners' mutual rights and responsibilities, as well as the LLP's responsibilities to its partners. The LLP agreement must be filed in MCA Portal's Form 3 online. Within 30 days of incorporation, Form 3 for the LLP agreement must be filed. Stamp Paper is required for the LLP Agreement.
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