Limited Liability Partnership has been introduced in India by way of Limited Liability Partnership Act, 2008. The basic premise behind the introduction of Limited Liability Partnership (LLP) is to provide a form of business organization that is simple to maintain while at the same time providing limited liability to the owners. A Limited Liability Partnership combines the advantages of both the Company and Partnership into a single form of organization and one partner is not responsible or liable for another partner’s misconduct or negligence. Therefore, all partners have a form of limited liability for each individual’s protection within the partnership, similar to that of the shareholders of a corporation. However, unlike corporate shareholders, the partners have the right to manage the business directly. An LLP also limits the personal liability of a partner for the errors, omissions, incompetence, or negligence of the LLP’s employees or other agents. LLP is one of the easiest form of business to incorporate and manage.
LLP Incorporation Process
Step 1: LLP Incorporation
You can incorporate a Limited Liability Partnership in 14 to 20 days, subject to ROC processing time.
Step 2: Obtaining DSC & DPIN
Digital Signature Certificate(DSC) and Designated Partner Identification Number(DPIN) is required for the proposed Partners of the LLP. DPIN and DSC can be obtained for the proposed Partners within 5 to 7 days.
Step 3: Name Approval
A minimum of one and a maximum of six proposed names must be submitted to the MCA. Subject to availability, naming guidelines and MCA processing time, Name Approval can be obtained in 5 to 7 working days.
Step 4: LLP Incorporation
Incorporation documents can be submitted to the MCA along with an application for incorporation. MCA will usually approve the application for incorporation in 5 to 7 days, subject to their processing time.
Frequently Ask Questions (FAQs)
|1||How many people are required to incorporate a Limited Liability Partnership?|
|To incorporate a Limited Liability Partnership, a minimum of two people are required. A Limited Liability Partnership must have a minimum of two Partners and can have a maximum of any number of Partners.|
|2||What are the requirements to be a Partner in a LLP?|
|The Designated Partners needs to be over 18 years of age and must be a natural person. There are no limitations in terms of citizenship or residency. Therefore, the LLP Act 2008 allows Foreign Nationals including Foreign Companies & LLPs to incorporate a LLP in India provided at least one designated partner is resident of India.|
|3||What is the capital required to start a Limited Liability Partnership?|
|You can start a Limited Liability Partnership with any amount of capital. There is no requirement to show proof of capital invested during the incorporation process. Partner’s contribution may consist of both tangible and/or intangible property and any other benefit to the LLP.|
|4||Can a LLP be incorporated for undertaking “Not-For-Profit” activities?|
|None of the essential requirements for setting LLP is ‘carrying on a lawful business with a view to profit’. Therefore, LLP cannot be incorporated for undertaking “Not-For-Profit” activities.|
|5||Is an office required for starting a Limited Liability Partnership?|
|An address in India where the registered office of the LLP will be situated is required. The premises can be a commercial / industrial / residential where communication from the MCA will be received.|
|6||Do I have to be present in person to incorporate a LLP?|
|No, you will not have to be present at our office or appear at any office for the incorporation of a Limited Liability Partnership. All the documents can be scanned and sent through email to our office. Some documents will also have to be couriered to our office.|
|7||What are the documents required for incorporation of LLP?|
|Identity proof and address proof is mandatory for all the proposed Designated Partners of the LLP. PAN Card is mandatory for Indian Nationals. In addition, the landlord of the registered office premises must provide a No Objection Certificate for having the registered office in his/her premises and must submit his/her identity proof and address proof.|
|8||How long will it take to incorporate a LLP?|
|You can incorporate a Limited Liability Partnership in 14-20 days. The time taken for incorporation will depend on submission of relevant documents by the client and speed of Government Approvals. To ensure speedy incorporation, please choose a unique name for your LLP and ensure you have all the required documents prior to starting the incorporation process.|
|9||What do I need to quickly incorporate my LLP?|
|To incorporate a LLP quickly, make sure the proposed name of the Limited Liability Partnership is very unique. Names that are similar to an existing private limited company / limited liability partnership / trademark can be rejected and additional time will be required for resubmission of names.|
|10||How long is the incorporation of the LLP valid for?|
|Once a Limited Liability Partnership is incorporated, it will be active and in-existence as long as the annual compliances are met with regularly. In case, annual compliances are not complied with, the LLP will become a Dormant and maybe struck off from the register after a period of time.|
|11||What are the annual compliance requirements for a LLP?|
|LLPs are required to file an annual filing with the Registrar each year. However, if the LLP has a turnover of less than Rs.40 lakhs and/or has a capital contribution of less than Rs.25 lakhs, the financial statements do not have to be audited.|
|12||What is a Digital Signature Certificate?|
|A Digital Signature establishes the identity of the sender or signee electronically while filing documents through the Internet. The Ministry of Corporate Affairs (MCA) mandates that all Designated Partners apply with a Digital Signature for Designated Partner Identification Number. Hence, a Digital Signature is required for all Designated Partner of a proposed LLP.|
|13||What is Designated Partner Identification Number (DPIN)?|
|Designated Partner Identification Number is a unique identification number assigned to all existing and proposed Designated Partner of a LLP. It is mandatory for all present or proposed Designated Partner to have a Designated Partner Identification Number. Designated Partner Identification Number never expires and a person can have only one Designated Partner Identification Number.|
|14||Can NRIs / Foreign Nationals be a Designated Partners in a LLP?|
|Yes, a NRI or Foreign National can be a Designated Partner in a Limited Liability Partnership after obtaining Designated Partner Identification Number. However, at least one Designated Partner in the LLP must be a Resident India.|
|15||Is Foreign Direct Investment (FDI) allowed in LLP?|
|Yes, Foreign Direct Investment (FDI) is allowed in LLP under the automatic route in sectors allowed by the Foreign Investments Promotion Board (FIPB). However, Foreign Institutional Investors (Flls) and Foreign Venture Capital Investors (FVCIs) will not be permitted to invest in LLPs. LLPs will also not be permitted to avail External Commercial Borrowings (ECBs.)|
|16||Can an existing partnership firm or company be converted to LLP?|
|Yes, an existing partnership firm or a company that is unlisted can be converted into LLP. There are many advantages of converting a partnership firm into a LLP; however, the same doesn’t apply for the conversion of a Company to a LLP.|
Advantages Of Limited Lliability Partnership Company
Separate Legal Entity:
A LLP is a legal entity and a juristic person established under the Act. Therefore a LLP form of organization has wide legal capacity and can own property and also incur debts. The Partners of a LLP have no liability to the creditors of a LLP for such debts.
A LLP has ‘perpetual succession’, that is continued or uninterrupted existence until it is legally dissolved. A LLP, being a separate legal person, is unaffected by the death or other departure of any Partner but continues to be in existence irrespective of the changes in Partnership.
Audit NOT Required:
A LLP does not require audit if it has less than Rs. 40 lakhs of turnover and less than Rs.25 lakhs of capital contribution. Therefore, LLPs are ideal for startups and small businesses that are just starting their operations and want to have minimal regulatory compliance related formalities.
The ownership of a LLP can be easily transferred to another person by inducting them as a Designated Partner of the LLP. LLP is a separate legal entity separate from its Managing Partners, so by changing the Managing Partners, the ownership of the LLP can be changed.
A LLP being a juristic person, can acquire, own, enjoy and alienate, property in its own name. No Partner can make any claim upon the property of the LLP so long as the LLP is a going concern.
Limited Liability means the status of being legally responsible only to a limited amount for debts of a LLP. Unlike proprietorships and partnerships, in a LLP the liability of the members in respect of the LLP’s debts is limited.
Capacity to sue and be sued:
To sue means to institute legal proceedings against or to bring a suit in a court of law. Just as one person can bring a legal action in his/her own name against another in that person’s name, a LLP being an independent legal entity can sue and also be sued in its own name.
In the LLP form of organization it is possible for a LLP to make a valid and effective contract with any of its members. Thus, a person can at the same time be a Partner, creditor, supplier and also an employee of the LLP.
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