Limited Liability Partnership Registration
Limited Liability Partnership (LLP) as a form of business organisation is an alternative corporate business vertical. It provides advantages of limited liability but allows its members to have flexibility in organising their internal structure like that of partnership.
WHY REGISTER FOR Limited Liability Partnership
LLP is a separate legal entity and the liability of partners is limited and registration of LLP under LLP Act, 2008 is compulsory.
Every LLP shall have at least two partners, also every LLP shall have a registered office to which all communications and notices may be easily addressed and received.
After registration, the LLP by its name be capable of:
- Suing and being sued
- Acquiring, owning, holding and developing or disposing of property, whether movable or immovable, tangible or intangible.
- Having a common seal, it decides to have one
- Doing and suffering such other acts and things as anybody corporate may do and suffer
It is to be kept in mind that every LLP shall have words either “limited liability partnership” or the acronym “LLP” as the last word of its name.
Also, LLP cannot use the name which is in the opinion of the central government undesirable and resembles an already registered LLP.
Registration of LLP is easy as compared to companies. Registered under the companies act, 2013 as the LLP can be formed without any minimum capital. There is no requirement of having minimum capital before registration. So it can be formed with any amount as contributed by the partners.
Advantages of Limited Liability Partnership registration
- Distinct entity/Separate legal entity: An LLP has a separate legal entity, that is, an LLP can sue and be sued in its own name. An LLP can sign the contracts with its own name. So the creditors of LLP shall be the creditors of LLP alone as the liability of partners is limited.
- Mutual Agency: No partner in LLP is liable on account of the unauthorised actions of others. That means that partners in LLP are liable to LLP but not liable to other partners. No one partner can bind the other partner by his acts.
- LLP Agreement: Mutual rights and duties of partners are defined under the LLP agreement. The LLP act provides flexibility to partners to devise the agreement which best suits them.
- Limited Visibility: The stability of partners will be limited to their agreed contribution in the LLP. Such contributions can be tangible form as well as intangible form. Limited Liability which means in case of failure in payments of debts by LLP. The partners will not be required to bring their personal assets to discharge such liabilities as their liabilities are limited to the extent of their contribution.
- Easy to dissolve: It is easy to dissolve LLP as dissolution is done either voluntarily or when it is ordered by the tribunal. Involuntary dissolution only resolution is required to pass and if 3/4th of majority agrees for dissolution then the LLP is dissolved.
- Low cost and smooth compliance procedures: The cost of registering an LLP is comparatively lower than that of public and private companies. Also, the compliance requirements are less. Only 2 statements are required to be filed by the LLP annually, that is, annual return and the statement of accounts and solvency.
- No Requirement of minimum capital to contribute at the time of registration: LLP can be incorporated without minimum capital requirements.
- Flexibility: Since the LLP contains elements of both a corporate structure as well as a partnership firm structure, LLP is called a hybrid between a company and a partnership. The partners can enjoy the advantages of both the company and partnership.
- Audit not compulsory: Audit requirement in the case of an LLP is not compulsory because the requirement to get accounts audited arises when:
- Contribution of LLP exceeds ₹25 lacs (Twenty-five lakhs) or
- When the annual turnover exceeds ₹40 lacs (Forty lakhs)
- Either one of the conditions is to be fulfilled otherwise audit requirement doesn’t arise
About Limited Liability Partnership registration
An LLP is a legal form of legal business entity with limited liability. It is an alternative to the corporate business vertical that not only gives benefits of limited liability with less compliance but provides the flexibility in maintaining internal structures as a traditional partnership.
The lawmakers envisaged the need for bringing LLP to meet the growing needs of the economy. A need has been felt for new corporates which act as an alternative to the traditional partnership businesses with unlimited liabilities.
In order to enable professional expertise and entrepreneurial initiative and combine, organize and operate in a flexible way, the LLP Act, 2008 was enacted.
The LLP Act, 2008 has 81 sections and 4 schedules. They are:
- The first schedule deals with mutual rights and duties of partners, as well as LLP when there is an absence of agreement.
- The second schedule deals with the conversion of the firm into LLP
- The third schedule deals with the conversion of a private company into LLP
- The fourth schedule deals with the conversion of unlisted public companies into LLP
It is monitored by the Ministry of Corporate Affairs and the Registrar of Companies.
Requirement for Limited Liability Partnership registration
The most important document is the incorporation document. In order to register the LLP, two or more persons shall subscribe to the incorporation documents.
The incorporation document shall be in the form as may be prescribed. When all the requirements have been complied with, then the ROC shall retain the incorporation document. A statement is also required to be filed with the ROC which is either made by CA or CS or a cost accountant who is engaged in the formation of the same.
Such professionals have to ensure that all requirements of the Act have been complied with. The registrar accepts the statement as sufficient evidence that registration of LLP is as per the act and provisions.
Procedure to register Limited Liability Partnership
- Name reservation: The first step to incorporate the limited liability partnership is the reservation of the name for the same. An applicant has to file an eform 1 for ascertaining availability and reservation of the name.
- Incorporation of LLP: After reserving the name, the user has to file eform 2 for incorporating a new LLP. Eform 2 contains the details of the LLP proposed to be incorporated, partners, designated partners details and consent of partner/designated partner to act as partner/designated partner
- LLP Agreement: Execution of the agreement is compulsory as per section 23 of the Act. LLP agreement is required to be filed to the registrar in eform 3 within 30 days of registration of the LLP.
Documents required for Limited Liability Partnership REGISTRATION
- Documents of the partners:
- Identity proof
- PAN Card copy
- Address proof of the partners
- Passport copy (in case of foreign nationals)
- Documents of the LLP
- Address proof of the registered address
- Certificate of digital signature