Limited Liability Partnership (LLP) or LLP registration is a newer form of business which is a mixture of a company and a partnership firm. While it has benefits and characteristics of a private limited company, it can be operated flexibly just like a normal partnership.
Compliances are lesser in LLP as compared to a company, yet the partners have limited liability since LLP acts as a legal entity separate from partners.In an LLP, some or all partners have a form of limited liability similar to that of the shareholders of a corporation. Unlike corporate shareholders, the partners have the power to manage the business directly. In contrast, corporate shareholders must elect a board of directors under the laws of various state charters. The board organizes itself (also under the laws of the various state charters) and hires corporate officers who then have as “corporate” individuals the legal responsibility to manage the corporation in the corporation’s best interest. An LLP also contains a different level of tax liability from that of a corporation.
Acts & Rules On MCA
The Ministry of Corporate Affairs (MCA) is primarily concerned with the administration of the Companies Act 2013, the Companies Act 1956, The Limited Liability Partnership Act, 2008 & other allied Acts, rules & regulations framed mainly for regulating the functioning of the corporate sector in accordance with law. In order to simplify the compliance procedures and provide consolidated information on applicable Acts, Rules and Regulations to the stakeholders, MCA has launched E-Book for 10 acts and applicable Rules and Regulations for companies and LLPs administered by it.
LLP Registration Process
- Obtain Digital Signature Certificate (DSC):-Before initiating the process of registration, you must apply for the digital signature of the designated partners of the proposed LLP. This is because all the documents for LLP are filed online and are required to be digitally signed. So, the designated partner must obtain their digital signature certificates from government recognized certifying agencies.
Here is a list of such certified agencies. The cost of obtaining DSC varies depending upon the certifying agency. Also, you should obtain class 3 category of DSC.
- Apply for Director Identification Number (DIN):- You have to apply for the DIN of all the designated partners or those intending to be designated partner of the proposed LLP. The application for allotment of DIN has to be made in Form DIR-3.
You have to attach the scanned copy of documents (usually Aadhaar and PAN) to the form. The form shall be signed by a Company Secretary in full- time employment of the company or by the Managing Director/Director/CEO/CFO of the existing company in which the applicant shall be appointed as a director.
- Name Approval:- LLP-RUN (Limited Liability Partnership-Reserve Unique Name) is filed for the reservation of the name of the proposed LLP which shall be processed by the Central Registration Centre under Non-STP. But before quoting the name in the form, it is recommended that you use the free name search facility on MCA portal.The system will provide the list of closely resembling names of existing companies/LLPs based on the search criteria filled up. This will help you in choosing names not similar to already existing names. The registrar will approve the name only if the name is not undesirable in the opinion of the Central Government and does not resemble any existing partnership firm or an LLP or a body corporate or a trademark.The form RUN-LLP has to be accompanied by fees as per Annexure ‘A’ which may be either approved/rejected by the registrar. A re-submission of the form shall be allowed to be made within 15 days for rectifying the defects. There is a provision to provide for 2 proposed names of the LLP.
- Incorporation of LLP:-
- The form used for incorporation is FiLLiP(Form for incorporation of Limited Liability Partnership) which shall be filed with the Registrar who has jurisdiction over the state in which the registered office of the LLP is situated. The form will be an integrated form.
- Fees as per Annexure ‘A’ shall be paid.
- This form also provides for applying for allotment of DPIN, if an individual who is to be appointed as a designated partner does not have a DPIN or DIN.
- The application for allotment shall be allowed to be made by two individuals only.
- The application for reservation may be made through FiLLiP too.
- If the name that is applied for is approved, then this approved and reserved name shall be filled as the proposed name of the LLP
- File Limited Liability Partnership (LLP) Agreement:-LLP agreement governs the mutual rights and duties amongst the partners and also between the LLP and its partners.
- LLP agreement must be filed in form 3 online on MCA Portal.
- Form 3 for the LLP agreement has to be filed within 30 days of the date of incorporation.
- The LLP Agreement has to be printed on Stamp Paper. The value of Stamp Paper is different for every state.
Benefits of an LLP Registration:
There are numerous benefits to be had from trading through an LLP:
- The LLP is deemed to be a legal person. It can buy, rent, lease, own property, employ staff, enter into contracts, and be held accountable if necessary.
- Corporate ownership. LLP’s can appoint two companies as members of the LLP. In an LTD company at least one director must be a real person.
- Designate and non-designate members. You can operate the LLP with different levels of membership.
- Protecting the partnership name. By registering the LLP at Companies House you prevent another partnership or company from registering the same name.
Disadvantages of an LLP Registration:
As with all formats of business there will be disadvantages as well as advantages. The following may be considered disadvantageous in some cases:
- An LLP must have at least two members. If one member chooses to leave the partnership the LLP may have to be dissolved.
- Residential addresses were historically recorded at Companies House. Whilst the use of ‘service addresses’ now allows for home addresses to be kept out of public view, any address previously supplied to Companies House is still part of the public record unless you pay for the records to be suppressed. For many businesses this is not a problem. However, there are some examples where this may not be desired. Consider solicitors and partners of law firms that may not want their home address so freely available if their work involves sensitive cases.
Limited Liability Partnership is considered easier to set up, It is comparatively hassle-free in the day to day operations, has significantly lower burdensome compliance requirements and costs, and therefore many see it as advantageous to begin their organization in this manner.
Penalty on non-compliance & Winding up and dissolution of LLP
The compliance that is to be followed by LLP is minimal. But, if these compliances are not completed on time, then the LLP will have to pay a heavy penalty. Even if the LLP does not have any activity in the year, it is required to file returns with the Ministry of Corporate Affairs (MCA) annually. If it fails to file the returns, then a heavy penalty will be imposed on the LLP.
A minimum of two partners is required to form an LLP. If the minimum number of partners is below two for six months, then the LLP will be dissolved. It may be dissolved if the LLP is unable to pay its debts.
Documents required for LLP registration in Jharkhand:
- Two Passport Size photos of Partners
- Copy of Pan card of Partners
- Copy of Aadhaar card or Voter ID of Partners
- Copy of Bank Statements or Bank Passbook or Electricity Bill of Partners
- Copy of Electricity Bill of Registered Office of proposed LLP
- Copy of Rent agreement with rent receipt or NOC of registered office (if office would be on rent)
Frequently Asked Questions (FAQ):
Ques:- How can I convert my existing partnership firm into LLP?
Any existing partnership firm that is willing to get converted into LLP will need to apply through Form 17 (Application and statement for the conversion of a firm into LLP. Form 17 needs to be filed along with Form 2 (Incorporation document and Subscriber’s statement).
Ques:- What is the difference between partner and designated partner at LLP in India?
Designated partner are like Director and partners are like shareholders.
The liability of the Partner is limited solely to Partnership Agreement. The Designated Partners are responsible towards the day to day functioning , liabilities prescribed by LLP Agreement as well as for all penalties imposed on Limited Liability Partners for contravention of any provisions applicable and to be complied with by the LLP.