Limited Liability Partnership (LLP) Registration
What Is Limited Liability Partnership?
Limited Liability Partnership is a type of partnership where the limited partners are concerned with protecting their own assets from debts, liabilities and losses. A limited liability partnership is a separate legal entity and legal entity from its partners. It is successful in all states and is registered under the LLP Act, 2008.
LLP (Limited Liability Partnership) is a company that provides liability benefits to the members as a single company. It allows the partners to manage the internal operations of the arrangement similar to a partnership. The partners reduce their liability for expenses incurred in the future during the operation of the business. The partners are required to contribute capital to the LLP as specified in the LLP deed and their capital can be used in various forms like tangible or intangible assets, movable or immovable, money and cash etc. They are liable for any loss or expense incurred, which means the members of the LLP have no such financial liability.
Features of Limited Liability Partnership
A Limited Liability Partnership (LLP) is a popular business structure in India that combines elements of both partnerships and corporations. Here are some key features of an LLP:
1. Limited Liability
- Protection for Partners: Partners in an LLP enjoy limited liability, meaning they are not personally responsible for the debts of the business beyond their investment in the LLP. This protects personal assets.
2. Separate Legal Entity
- Independent Existence: An LLP is considered a separate legal entity from its partners. It can own property, enter contracts, and sue or be sued in its own name.
3. Flexible Management Structure
- Operational Flexibility: LLPs allow for a flexible management structure where partners can decide how to manage the business without being constrained by strict corporate governance requirements.
4. No Minimum Capital Requirement
- Capital Contribution: There is no minimum capital requirement to form an LLP, making it accessible for small businesses and startups.
5. Number of Partners
- Flexible Membership: An LLP can have a minimum of two partners and a maximum of 200 partners, offering flexibility in terms of partnership structure.
6. Perpetual Succession
- Continuity: The existence of an LLP is not affected by changes in the partnership, such as the death or departure of a partner. It can continue to operate as a going concern.
7. Taxation
- Pass-through Taxation: LLPs are taxed as partnerships, meaning profits are passed through to the partners, who are taxed individually. This avoids double taxation that occurs in corporations.
8. Compliance Requirements
- Regulatory Framework: LLPs have relatively fewer compliance requirements compared to companies, though they must adhere to certain filings and maintain proper records.
9. No Restriction on Ownership
- Foreign Investment: LLPs can have foreign partners, and foreign investment is allowed, making it a viable option for international businesses entering India.
Procedure for Alteration of LLP Agreement
Step 1: Review the Existing LLP Agreement
- Check Provisions: Before making changes, review the existing LLP Agreement to understand the clauses related to amendments.
- Identify Changes: Determine the specific changes you wish to make and ensure they are permissible under the agreement.
Step 2: Draft the Altered Agreement
- Prepare Revised Draft: Draft the modified version of the LLP Agreement, incorporating all necessary changes.
- Include Signatures: Ensure that all designated partners sign the amended agreement, as their consent is essential.
Step 3: Pass a Resolution
- Partner Approval: Convene a meeting of partners to discuss and approve the changes. A resolution should be passed to formalize the amendment.
- Record Minutes: Document the meeting minutes, including details of the discussion and the resolution passed.
Step 4: File with the Registrar of Companies (ROC)
- Form LLP-3: Prepare and file Form LLP-3 with the ROC within 30 days of making the amendment. This form is used to notify the ROC about changes to the LLP Agreement.
- Attach Documents: Include the following documents with the form:
- The altered LLP Agreement (in PDF format).
- A copy of the resolution passed by the partners.
Step 5: Payment of Fees
- Fee Payment: Pay the necessary filing fees as prescribed by the ROC. The fee may vary based on the state and the number of partners.
Step 6: Obtain Confirmation
- ROC Acknowledgment: After submission, the ROC will review the documents. Once approved, you will receive an acknowledgment.
- Updated Agreement: Keep a copy of the updated LLP Agreement along with the ROC acknowledgment for your records.
LLP Agreement Format
LLP AGREEMENT
THIS LLP AGREEMENT is made on [Date] by and between:
- Partner 1: [Name], son/daughter of [Parent’s Name], residing at [Address].
- Partner 2: [Name], son/daughter of [Parent’s Name], residing at [Address].
- (Add more partners as necessary)
(Collectively referred to as “the Partners”)
1. Name of the LLP
- The name of the Limited Liability Partnership shall be [LLP Name].
2. Principal Place of Business
- The registered office of the LLP shall be situated at [Address].
3. Objectives
- The main objectives of the LLP are:
- [Objective 1]
- [Objective 2]
- [Additional objectives]
4. Duration
- The LLP shall commence its operations on the date of registration and shall continue until dissolved by the Partners.
5. Capital Contribution
- The initial capital contribution of each Partner shall be as follows:
- Partner 1: ₹[Amount]
- Partner 2: ₹[Amount]
- [Add more partners as necessary]
6. Profit and Loss Sharing
- Profits and losses of the LLP shall be shared among the Partners in the following ratio:
- Partner 1: [Percentage]%
- Partner 2: [Percentage]%
- [Add more partners as necessary]
7. Management and Authority
- Each Partner shall have equal rights in the management of the LLP. Decisions shall be made by a majority vote of the Partners.
- [Specify any special powers or restrictions for partners, if necessary.]
8. Meetings
- Meetings of the Partners shall be held at least [Frequency] and can be called by any Partner by providing [Notice Period] notice to the others.
9. Admission of New Partners
- New Partners may be admitted with the unanimous consent of all existing Partners.
10. Withdrawal and Removal of Partners
- A Partner may withdraw from the LLP by giving [Notice Period] notice to the other Partners.
- A Partner may be removed for [Specify grounds, if any] with the unanimous consent of the other Partners.
11. Dissolution
- The LLP may be dissolved by:
- Unanimous decision of the Partners.
- Expiration of the term (if specified).
- [Other grounds for dissolution].
12. Governing Law
- This Agreement shall be governed by and construed in accordance with the laws of India.
13. Miscellaneous
- Any amendments to this Agreement must be made in writing and signed by all Partners.
- [Include any other clauses as needed.]
Advantages of Limited Liability Partnership
Limited liability: Partners in a limited partnership are not personally liable for the debts and obligations of the limited partnership. This means that if the LLP goes bankrupt, its assets are protected. This avoids double taxation when the company distributes its profits to shareholders. Partners can agree on any management model they choose, and there are no restrictions on changing ownership shares.
FAQ's on Limited Liability Partnership (LLP) Registration
An LLP is a business structure that combines the features of a partnership and a corporation. It provides limited liability to its partners while allowing them to manage the business.
- Limited Liability: Partners are only liable for the amount they contribute.
- Separate Legal Entity: An LLP can own assets and enter into contracts in its own name.
- Flexible Management: Offers flexibility in management compared to traditional companies.
- No Minimum Capital Requirement: There is no minimum capital requirement to start an LLP.
A minimum of two partners is required to form an LLP. There is no maximum limit on the number of partners, but it cannot exceed 200.
Yes, foreign nationals can be partners in an LLP. However, at least one partner must be a resident of India.
Key documents include:
- Proof of identity and address of partners.
- Digital Signature Certificate (DSC) for designated partners.
- Director Identification Number (DIN) for designated partners (if applicable).
- LLP Agreement.
- Address proof of the registered office.
- Obtain Digital Signature Certificate (DSC).
- Apply for Director Identification Number (DIN) for designated partners.
- Choose a unique name for the LLP and get it approved.
- Prepare and file the LLP Agreement and Form 2 (Incorporation Document) with the Ministry of Corporate Affairs (MCA).
The registration process usually takes about 10-15 working days, depending on the completeness of the application and the workload at the Registrar of Companies (ROC).
Yes, an LLP Agreement is mandatory. It outlines the rights, duties, and obligations of partners, as well as the operational structure of the LLP.
After registration, an LLP must comply with:
- Filing annual returns.
- Maintaining proper accounting records.
- Conducting audits if the turnover exceeds the prescribed limit.
- Compliance with tax filings, such as GST registration if applicable.
Yes, an LLP can be converted into a Private Limited Company, provided it meets the necessary requirements and follows the prescribed process.