ALimited Liability Partnership LLP is defined as a business that shares the limited liability benefits of a corporation but management and tax freedom of a partnership.LLPs are legal entities created under state law. In 1980s LLPs grew more as in response to demand for an organization that gave limited liability to its members, but avoided the double tax regime applied to corporations. By 1991,every state of the Union had passed a statue allowing the creation of LLPs.
Concepts of LLP
The LLP can continue its existence irrespective of changes in partners and capable of entering into contracts and holding property in its own name. It is a separate legal entity, that is liable to the full extent of its assets but liability of the partners is limited to their agreed contribution in the LLP.
No partner is responsible on account of the independent or un-authorized actions of other partners, thus individual partners are shielded from joint liability created by another partner’s wrongful business decisions or misconduct.
Mutual rights and duties of the partners within an LLP are governed by an agreement between the partners. The LLP, however, is not relieved of the liability for its other obligations as a separate entity.
Since 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.
Salient Features of LLP/Benefits
• Seprate Legal Entity:
A private limited company has a separate corporate personality and a legal entity that is distinct from its past, present and future.
• Perceptual succession:
A member has a benefit of perpetual succession and can continue its existence even after the retirement, death, insanity of one or more respective partners in the firm.
An agreement is printed on a stamp paper and signed by all the partners that define their roles and duties in the firm. It helps them in the decision-making process
• Restricted Liability:
Member liability is limited. There is no need to make any minimum amount of capital contribution for membership.
LLP registration can be done easily by online procedure. The forms and the documents are filed electronically on the official MCA portal. A designated partner of a limited liability partnership firm has to obtain DSC to sign these documents and forms.
• Limited Liability:
If a public or private company or a partnership firm decides to emerge as a limited liability partnership, they can easily convert as per the provisions of the applicable act.
Points to remember before giving name to LLP Firm
Before giving any name to LLP Firm the following points should be kept in mind:-
* Short and Simple
* Unique in nature
* Linked to affairs of the concerned business, i.e., must establish branding and trademark
* Shall not be offensive to any religion, caste, sex, creed, community and society
* Must not be against the Public Policy
* Must not be in contrary to the local/state/central government
* Shall not be similar to the name of any existing LLP
* Must not include any prohibited word or character
* Prior approval from SEBI, RBI, IRDA is required if in case the said name includes word like bank, finance, mutual fund, and insurance etc.
LLP registration is an easy online procedure that includes 5 steps to register your LLP Firm. This process takes 10-15 days if your papers are completed. Here is the step by step guide for Limited Liability Partnership Firm Registration:
Obtain Digital Signature Certificate
• Firstly, you have to obtain DSC for a designated partner of the firm for LLP registration. The DSC is important because LLP registration is an online process and all the documents are to be signed digitally. The designated partner has to obtain their DSC from the government recognized agency. The cost may vary from agency to agency. Make sure to obtain a class 3 or class 2 DSC certificate.
Apply for DIN
• DIN is abbreviated form of Designated Identification Partners Number.It is mandatory for all the designated partners of the LLP firm. To obtain DPIN it must to fill Form DIR-3 along with the scanned copy of Aadhar card and PAN card of applicant and form which should be signed by the company’s secretary or The Managing Director/CFO/CEO of the LLP firm in which he/she is appointed as a Director.
Get A Name Approval
• LLP registration is reserving a name for the limited liability partnership firm. For that, an applicant has to file LLP-RUN (Reserve Unique Name) form. The name should be unique and non-offensive. On MCA Portal free name search facility is available. The Portal shows you a list of names resembling with your firm’s name. It would be very helpful for you to select an appropriate name for your LLP Firm. An applicant has to provide up to 2 names that would be further analyzed by the Registrar. In case of any rejection/objection, you can re-submit your form after 15 days of the rejection.
Incorporation of LLP
• Once the name has been reserved for LLP Firm registration you can move ahead to the incorporation of your LLP. First, you have to file FiLLiP i.e. “Form for incorporation of Limited Liability Partnership”. It is filed by the Registrar of the firm of the respective state in which the registered office is situated. Applicant has to pay a particular amount of incorporation fees as per the Annexure “A”.
File LLP Agreement
• LLP agreementsmust be filled in the form of the mutual rights and duties among LLP and its partners. All the documents and applications are duly checked by the authorities and if all goes well, incorporation certificate is issued.
Minimum Requirements for LLP Registration
Documents from the Partners
Residential /Address Proof
An applicant of an LLP firm requires to submit the residential proof of the registered office during or within 30 days of the LLP firm registration. In case the Registered Office is on rent, a rent agreement along with the NOC (No Objection Certificate) has to be submitted. An applicant can submit any of the utility bills such as electricity, telephone, the gas bill for the residential proof. Make sure the bill is the latest one and should not be older than two months and contains the complete address of the concerned premises.
DSC or Digital Signature Certificate
Any of the designated partners of the LLP firm can opt for a DSC that would be required to sign all the forms on a digital platform
A Form for the reservation of name for the firm.
3 Form 5
A notice for the change of name.
4 Form 17
An application for the conversion of a firm into an LLP.
5 Form 18
An application for conversion of a private or a public company into an LLP
Post Incorporation Requirements
After completion of LLP registration, Partners has to do fulfill Post compliances as well, which is very important. These compliances are one time in nature and are not repeated.
• Partnership Agreement Filing
• Apply for PAN & TAN
• Open Bank Account
Partnership Agreement Filing:
• It helps to avoid future conflicts and disputes in partners..
• It helps in maintaining peace and prosperity.
• It defines the rights and duties of all the respective members who are the part of LLP Registration firm.
• It must to be filed on the MCA portal within 30 days of LLP Incorporation.
• It shall be printed on a stamp paper and signed by all the partners of the firm.
• Value of the stamp paper varies from state to state.
PAN and TAN
• All partners of LLP firm must have PAN and TAN Number.
• Without it firm cannot open a bank account for carrying out further transactions.
Open a Bank Account
• Open a bank account in the name of your LLP Registration firm to carry out financial transactions.
Annually Compliances LLP
Form-8- Filing of Statement of Accounts ,30th October
Form-11- Filing of Annual Returns, 30th May
ITR-5-Income tax return, 31st July
Audit-Tax Audit (Only if Applicable), 30th September
Note: Late filing of such forms entail penalties of Rs. 100/- per day of default.
Time for LLP Firm Registration in India:- Generally, to finish the LLP registration procedure takes 15 to 30 working days (approx.). The timeline may vary depending on responses from ROC department.
Q Who all can become a partner in LLP?
Individuals, company or foreign national can become a partner in a Limited Liability company. The individual must 18+ above in terms of age and should have a valid PAN card.
Q What is the difference between LLC and LLP?
The term LLC means a limited liability company. It is similar to a private or public limited company; however, the concept of this business structure is not applicable in India. Whereas, LLP stands for Limited Liability Partnership, it is a hybrid structure of a private limited company and a partnership firm prevalent in India.
Q. How much time is required for registering a limited liability partnership firm in India?
Generally, to finish the LLP registration procedure takes 15 to 30 working days (approx.). The timeline may vary depending on responses from ROC department.
Q. Are there any rules for choosing the name of a limited liability company in India?
• The name of a LLP must be unique.
• It should be relevant to the service it is providing.
• It must not be generic and same as any other existing name.
Q. What does contribution mean in LLP?
The Contribution of Partners in the form of cash, promissory notes, agreements, tangible or intangible property, movable or immovable property to the Company is termed as Contribution.
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