Limited Liability Partnership

What is a Limited Liability Partnership (LLP)?

In India, professionals like CAs, CSs, etc., are prohibited from operating in the form of a company, hence, they operate as partnership firms. One thing to note about partnership firms is that partners have unlimited liability, i.e., in case a partnership firm fails to pay its obligations, the partners have to meet the obligation out of their own pockets. To overcome this, a new concept was launched in the form of Limited Liability Partnerships in 2009. An LLP has combined features of a private limited company and a partnership firm, offering limited liability to its members without a substantial increase in legal or corporate compliances.

Advantages of LLP

• It ensures perpetual succession and separate legal entity, as in the case of a company.
• Limited liability of all members.
• Provisions relating to taxation are same as of partnership firms.
• No restriction on the minimum capital required, and minimum 2 members are required to start an LLP. Also, there is no restriction on maximum number of members (like in case of a private limited company and partnership firms).
• Unlike companies, audit is not compulsory for all LLPs, audit is mandatory only if certain thresholds are crossed. 
• As flexible as a partnership firm in spite of having limited liability.
• Conversion of a limited liability partnership into a private limited company or a public limited company is comparatively easy.

Steps involved in LLP Registration

Like a private limited company, LLPs are registered under the Ministry of Corporate Affairs too. Registration as an LLP involves various steps listed below:

• Same as in the case of a Pvt. Ltd. Company, the designated partners of an LLP are required to have DSCs for digital ratification of documents and so, the first step is getting DSCs for all partners.
• Further, the designated partners are also required to be registered with the Ministry and for that DPIN (Designated Partner Identification Number) is required for all partners. The process of acquiring DPIN is also similar to that of DIN. 
• Third step being reservation of name for the LLP. A list of preferred names is submitted along with the prescribed form. This reserves the desired name for a period of 20 days.
• Once the name is reserved for us, we move ahead with preparation and filing of all the documents required for incorporation. A subscriber’s statement is also filed, this statement mentions names of partners / nominees / witnesses and their signatures. After filing of incorporation documents, it takes up to 15-20 business working days for the entity to come into existence. 
• Once the LLP is incorporated, the LLP agreement executed between the designated partners is required to be filed with the ROC in Form 3 online within a period of 30 days since incorporation.  

Documents Required for LLP Formation

• For acquiring DSC and DPIN – Address and Id proof of the applicants. A few basic details along with photographs. 
• If the desired name is a registered or applied for trademark, documents showing that the applicants have the ownership over it. In some cases, NOC from the registered proprietor of the trademark may be required. 
• For becoming a partner in Indian LLP, a foreign national or an NRI is required to submit notarized passport.

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