Procedure for forming a limited liability partnership in India

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Procedure for forming a limited liability
partnership in India

• In this blog, we have discussed about the
  procedure for forming a limited liability
  partnership (LLP) in India in a user friendly
  manner.

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Procedure for forming a limited liability
partnership in India

• Chiefly, LLP stands for limited liability
  partnership. The Parliament of India passed the
  Limited Liability Partnership Act in 2008 to
  govern LLP businesses in India. According to
  Section 2 of this law, an LLP is a partnership
  registered under the Act. Further, an LLP
  agreement refers to a written agreement between
  an LLPs partners or between the LLP itself and
  its partners. This agreement defines the rights,
  liabilities, duties, and powers of the partners.
  The procedure for forming an LLP is very easy.

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Procedure for LLP formation

• Moreover, the LLP can be restricted to raise fund
  from public by issuing securities or by debts.
  The LLP can get the funding by its partners or
  through the banks in the form of loans. The
  partners cannot take any actions without the
  consent of majority partners in the LLP. One
  partner should seek the approval of other
  partners for doing any activity.
• However, LLP doesnt have more creditability as
  compared to other companies. People always prefer
  these types of company for investing the money
  and running their business under the name
  of private limited company or public limited
  company. The LLP is easy to attract the investors
  and business expansion is easy compared to all
  other type of company.

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Procedure for the eligibility of LLP

• PARTNERS
• Although, minimum two designated partner is
  required to register the LLP. Both the partner
  should have Designated Partner Identification
  Number (DPIN). There is no maximum limit for the
  partners and designated partners, but every
  person who wants to become a designated partner
  in the LLP must have the DPIN. Both partners and
  designated partners can directly take part in the
  LLP, likewise the LLP registration requires only
  the designated partners.
• NAMING PROCEDURE
• Consequently, the name of the Limited liability
  partnership must have the word LLP at the end
  of the name. For example XYZ marketing LLP
  here the XYZ denotes the name of the company and
  marketing signifies that the LLP is indulging in
  the business of marketing and LLP word shows the
  business format.

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REGISTERED OFFICE In fact, the LLP must have a
registered office and it should mentioned in
the LLP agreement. If any of the partner wants to
change the registered office then firstly he
should take the consent of all designated
partners and after seeking the approval he can
intimate about the changes to the registrar of
the companies. CAPITAL No minimum capital
requirement for the LLP registration. The
partners and designated partners can start LLP by
investing any amount of money.
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Advantages of LLP

• Specifically, the LLP is a partnership entity
  with company features. But, as a company LLP is
  also separate legal entity and both LLP and its
  partners will differ from each other. All
  partners and the designed partners have limited
  liability. They are likely to contribute only the
  amount which they agree to provide as
  per LLP agreement. The LLP formation is
  straightforward and very cheap.
• Moreover, the registration of partnership firm is
  not mandatory for the partners, but they may not
  register their partnership firm by mutual
  consent. So, registering LLP at first prevents
  certain risks. The LLP has the legal identity. In
  particular, the LLP is easily transferable. As
  the LLP is distinct from its partners and it is
  also a separate entity, therefore, it is easy to
  transfer the LLP.

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Distinct Features of an LLP
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• 1. Procedure for separate legal entity
• In essence, Limited liability partnerships are
  treated as separate legal entities. This means
  that LLPs can own assets and incur liabilities in
  their own names. They can also enter into
  contracts and sue and be sued in their own names.
• 2. Limited liability of partners
• However, the liabilities of partners are separate
  and limited. Their personal assets will not
  liable to attachment in case the LLP registration
  is winding up or suffering certain legal
  consequences of repayment of debt.
• Partners liabilities, however, can become
  unlimited in cases of offenses like fraud, the
  commission of an offense, or any other wrongful
  and illegal act.

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• 3. Procedure for Sharing of profits
• In the same way, all the partners of limited
  liability partnerships should share profits of
  business like partners of regular firms. However,
  they can freely decide the share profits ratio.
• 4. Partners of LLPs
• Moreover, LLP partners can be natural persons,
  i.e. individuals, or even body corporate.
  Furthermore, an individual cannot be a partner if
  he suffers from unsoundness of mind or he is
  insolvent.
• LLPs must have a minimum of two partners at all
  times. The maximum number of partners is
  unlimited, regular partnership firms it is
  restricted for 50 partners.

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Procedure for LLP Company Registration in India
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• 1. Digital Signature Certificate (DSC)
• The documents for LLP are filed online and
  digitally signed for LLP Registration, the
  partner must obtain their digital signature
  certificates.
• 2. Director Identification Number (DIN)
• Form DIR- 3 should be filled .Attach the scanned
  copy of documents (Aadhaar and PAN) to get the
  DIN of all the designated partners.
• 3. Reservation of Name Procedure
• In particular, you should also provide six names
  in the order of preference in Form 1 among which
  the one is being approved

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• 4. Incorporation of LLP
• Form 2 must be filled for incorporation of the
  LLP. It contains the information like the total
  number of partners and designated partners, their
  names and amount of partners contribution etc.
  It takes nearly 15-20 days for the registration
  of LLP.
• 5. Limited Liability Partnership Agreement
• After the acceptance of the application, the
  incorporation certificate will be issued by the
  Registrar. After the issuance of incorporation
  certificate, the LLP will be considered to be
  registered. Further, the application for PAN and
  TAN can be made according to the procedure.
  Moreover, within the 30 days time, the Partners
  have to file the Partnership Agreement with the
  MCA. LLP company registration agreement describes
  about the rights and duties of the partners. It
  must be filed in Form 3 and has to be printed on
  Stamp Paper.

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LLP Agreements include certain provisions

• First and foremost comes the Name of the
  LLP which should always end with LLP or Limited
  Liability Partnership. There are a few post
  registration compliance for LLP to ensure smooth
  running of an LLP.
• Date and Agreement of the partnership certain
  procedure and details of the future name changes,
  initial partners, new partners admission,
  business activities and their scope, power of
  LLP, duration, management, accounting, auditing,
  etc.
• Profit, capital and Interest sharing ratio the
  contribution ratio of partners in terms of
  capital, interest on contribution, profit sharing
  ratio as well as the time period after which the
  capital can be withdrawn by any of the partners
  is necessary.

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• Allocation and Distribution clarifies the method
  of profit-sharing among partners and distribution
  including interim distribution or final
  distribution in the LLP.
• Terms and Conditions describes when the partners
  can withdraw or disassociate from the LLP. The
  Agreement explains the procedures, rights of the
  existing partners, and rights on assets after
  disassociation, as well as notice to existing
  partner.
• Partnership Rights which include the admission of
  a new partner and their rights thereafter.
  Re-admission or withdrawal of any of the
  partners, the rights of existing partners, and
  rights on assets after disassociation, as well as
  notice to existing partner.
• The Agreement includes the name of the
  person/partner responsible Management, Meetings
  of partners, fiduciary duty, etc.

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Documents Required For LLP Company
Registration

• Documents of Partners
• Passport-size photographs
• PAN Card/ ID Proof of the Partners
• Address Proof of Partners (Voters
  ID/Passport/Drivers license/Aadhar Card)
• Residence Proof of Partners (Latest bank
  statement/telephone bill/mobile bill/electricity
  bill/gas bill)
• Passport (in case of Foreign Nationals/ NRIs)
• Documents of LLP
• Proof of Registered Office Address(Notarized
  Rental Agreement in English/NOC from property
  owner/Utility bill)
• Digital Signature Certificate