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Limited liability Partnership
Limited liability Partnership is where companies have limited liabilities with all the partners depending on the jurisdiction. LLP is a separate legal entity with limitless partners. The partners of the LLP (Limited Liability partnership) where the partnership is not liable for the losses of the company. In this type of partnership, no single person is responsible for negligence or misconduct.
Under a Limited liability partnership, the partners can directly manage the business. And An LLP can independently raise funds from banks, partners and non-banking financial companies. The company can be owned either by an individual or by a corporate entity.
The concept of LLP was legally introduced and sanctioned in India officially in 2008. This partnership has perpetual succession. An LLP is an individual legal partner and separate entity from the partners and shareholders.
It’s an alternative business form or structure that gives benefits of limited liability, unlike public registration companies. Setting up a company with more than one person suits best for the LLP registrations. The company under LLP can exist seamlessly irrespective of the changes in stakeholders.
Keep reading to know more about how exactly your company is few steps away from becoming your own company.
Characteristics of LLP
The characteristics of liability limited registrations are:
- Companies with LLP registrations are managed by members or managers directly. Unlike in the private limited registration shareholders, partners have direct control over the business under LLP registration.
- The liability for the partners is limited
- The limited liability allows the partners the flexibility of organising of their internal structure.
- They have limited record keeping unlike the private registration limited company.
- The shareholders of the company are themselves the owners of the company.
- It’s a separate legal entity.
- It has a principal agent Relationship with unlimited liability and sharing of profit equally among themselves.
- The company under LLP registration has business continuity with two or more members.
- A minimum of two members are required for the company to be registered under LLP registration and no upper limit is required.
- LLP registered company members get compensation and even earning based on the ownership percentage.
- The members also receive pay as a manager in a LLP registered company.
- An HUF or its karta cannot become partners in LLP registered company
- LLP registered company is officially registered under ministry of corporate affairs i.e under central government.
- The processing timing for registration of a company under LLP takes approximately 15-20 minutes.
Benefits of private LLP
LLP agreement is a written agreement between the partners of LLP and the corporate partners who established rights and duties of the partners towards each other. It is a separate corporate body created by law, governed under the schedule One of the LLP Act unless the LLP creates an agreement.
There are many benefits for both the company and partners in an LLP registered company.
Limited liability partnerships allow for a partnership structure where each partner’s liabilities is limited to the amount they put into the business.
Following are the benefits of LLP:
- Body corporate and separate legal entity under LLP from its partners which makes it convenient. It makes it easier to start a business and manage those businesses like entrepreneurs.
- The liability of the partners is limited to their contribution with no requirements of minimum capital contribution.
- The rights and duties of partners are governed.
- The cost of forming an LLP is lesser than that of a company of any other registration.
- The number of compliances of LLP is less when compared to the private limited side.
- The formation of a company is easy with no limit of partners and tax benefits.
- No minimum contribution is required from the partners, the can contribute as per the LLP agreement.
- There will be a lower cost of registration in LLP than any other forms of registrations.
- It also has separate perpetual succession.
LLP registration process
1. PROCURE DSC
Procuring DSC means procuring digital signature certificates for the designated partners of the limited liability partnership. This procurement is done by filling the application online. The LLP’s are registered with the registrar of the companies which is appointed under the companies act 1956. During the registration at least two applications of the two members must be filled online.
There is eligibility for at least one of the members to be from the foreign as well.
2. RESERVE LIMITED LIABILITY PARTNERSHIP COMPANY NAME
Draft file LLP form No 1 which is an application for reservation of name or change of name by logging onto the Limited liability partnership portal. Pay the fee as prescribed by attaching the procured DSC (Digital signature certificate). Mention the name of the designated partner or candidate or member who is proposing to incorporate an LLP.
3. APPLY FOR INCORPORATION
Application of incorporation in LLP is filed in form FILIP (form for incorporation of limited liability partnership with required documents. The form consists of a DIN application for maximum 2 designated candidates. Under applying for incorporation you have to begin with login into the MCA website.
Create a new account by login into the MCA website. Fill up your details that are required to be in the online form. Attach the required file and submit the form. After submitting pay your fees and collect the challan generated. The reserved name shall be valid for 20 days from the approval date.
4. FILL BOTH PAN AND TAN
Once you get a certificate of incorporation, the applications of Liability limited registered companies get both PAN and TAN separately for the company alone. The COI (Certificate of Incorporation) of the company which is newly incorporated includes both PAN and TAN in addition to the Corporate Identity number. This procedure takes from 1 to 4 days maximum.
5. LLP AGREEMENT
LLP Agreement is a pact of rights and duties of the parties involved. These parties can be both corporate and individuals. You should also mention the objective of the company. The definition and interpretation clause should be mentioned where parties may specify any general principle of the company. Mention the role of partners in the company, and their contribution, duties and power in the company.
You can specify remunerations with working partners with defined interests in the agreement.
Documents required for LLP registration
Documents required for LLP registrations are for both company and individuals/partners.
1. ID Proof of partners
All the partners of the LLP company are required to provide their PAN both at the time of registration. The PAN card acts like a primary ID proof.
2. Proof of registered Office Address
The registered office proof address is to be submitted during registration within the 30 days of incorporation. If the registered office is taken on rent, get both rent agreement and no objection certificate with the consent of the landlord. Get electricity bills, gas bills and telephonic bills with the complete address of the place.
3. Address proof of partners
Address proofs of the partners include voter ID, Passport which include name and address proof and PAN card, which should be submitted to RoC after being corrected.
4. Passport and Photographs
Partners should provide photographs and passports (even of foreign nationals and NRI’s) compulsorily. The proof of address can submit driving license, bank statements, residence card or any government card that contains the address.