All you need to know about Limited Liability Partnership (LLP)

Last Updated On: Nov. 20, 2021, 11:23 p.m.
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LIMITED LIABILITY PARTNERSHIP ACT,2008

In the year 2008, the concept of Limited Liability Partnership was introduced. LLP's limits liability by ensuring that the partners personal assets and belongings are not liquidated in order to pay the obligations incured by the firm.

Limited Liability Partnership is the most preferred form of organization among entrepreneurs as it incorporates the benefits of both partnership firm and company into a single form of organization. LLPs in India are regulates by the Limited liability Partnership Act, 2008.

Every LLP should mandatorily have at least two designated partners. One of the partners must be a resident of India, which means he/she must have stayed in India for at least 182 days.

 

What are the Features of LLP ?

  • LLP has a separate legal entity just like companies.
  • The liability of each partner is limited to the contribution made by the partner.
  • Low cost and Less compliances and regulations are applicable on LLP.
  • Stamp Duty on LLP Agreement is fixed as per the Capital Contribution by all the partners.
  • The cost of forming an LLP is low and Name Reservation is also for a longer period of time (3 months)
  • For LLP, under LLP Act, 2008, there is no provision like Rotation of partners, like in case of companies.
  • LLP, under Income Tax Act, 1961, deemed dividend (Dividend Distribution Tax) is not applicable.
  • LLPs are required to have its accounts audited by a practicing Chartered Accountant only if its annual turnover, in any financial year exceeds Rs. 40 lakhs or its contribution exceeds Rs. 25 lakhs.

 

What are the qualifications to become a partner?

Any individual or body corporate may be a partner in a LLP. However an individual shall not be capable of becoming a partner of a LLP, if –

(a) he has been found to be of unsound mind by a Court of competent jurisdiction and the finding is in force;

(b) he is an undischarged insolvent; or

(c) he has applied to be adjudicated as an insolvent and his application is pending.

 

List of Forms Related to LLP

  • Form 7 is required to obtain a Designated Partner Identification Number while registering your LLP. It may be downloaded from the MCA website. Along with the duly completed form, a registration fee of ₹100 must also be paid.
  • An LLP agreement must be made which outlines the duties of each partner involved. This requires filling and submitting Form 3.
  • Form 1/ RUN-LLP is required to register a name for the LLP and reserve it. It may be used to christen an LLP or to alter the present name. The fee for submitting this form is ₹ 10,000.
  • The partners for their DSC to be registered if it hasn’t already been done before.
  • Form 2/FiLLiP  is required for incorporating a registered LLP. This form must be sent to and acknowledged by the concerned State’s Registrar.
  • In the case of changing, altering, adding or removing partners, the others must submit Form 4.
  • Form 11 must be used to file the IT returns of the LLP.
  • If LLP Form 11 (Annual Return) is not filed on or before the due date of 30th May, then a penalty of Rs.100 per day will be charged/ applicable, until the non-compliance continues.
  • Similarly, if LLP Form 8 (Statement of Account & Solvency) is not filed on or before the due date of 30th October, then a penalty of Rs.100 per day will be charged/ applicable, until the noncompliance continues.
  • If the office address of the LLP is to be changed, then Form 15 must be filed.

 

HOW TO INCORPORATE A LLP ?

  • The incorporation of LLP is to be done through e form FILLIP and the agreement for the same is filed through e form FORM 3.
  • NAME RESERVATION OF LLP is done through RUN and the name applied for LLP will be valid/ available of a period of 3 months in which the LLP is to be incorporated.
  • After incorporation of LLP, LLP AGREEMENT is to be file with the REGISTAR OF COMPANY (ROC) through FORM 3 within a period of 30 days.
  • For incorporation of LLP, the following information and documents are required –
  • Proposed name and objects of the LLP.
  • Minimum two partners are required to incorporate an LLP. However, there is no upper limit on the maximum number of partners of an LLP.
  • In LLP, there should be minimum of two designated partners who shall be individuals, and at least one of them should be resident in India.
  • The total capital contribution and ratio of capital contribution amongst the partners and designated partners.
  • DSC of any one the designated partners.
  • Identity proof and residential proof of all the partners.
  • Proposed Registered office of the LLP.
  • MAIL ID and Contact details of the proposed LLLP.
  • Board Resolution of the company, if any body corporate is the partner of the LLP.
  • Consent of existing LLP as a proof of no objection, if any LLP is a partner in an proposed LLP.
  • Consent of the partners.
  • Detail of LLP(s) and/ or company(s) in which partner/ designated partner is a director/partner.
  • Approval of the owner of the trademark or the applicant of such application for registration of Trademark.
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