A Limited Liability Partnership (LLP) provides partners with limited liability protection, separating personal assets from business debts. Governed by the LLP Act of 2008, an LLP operates as a separate legal entity, allowing perpetual succession and the ability to own property and enter contracts. Registration requires a minimum of two partners, with at least two designated partners, along with necessary documents like a digital signature certificate and LLP agreement.
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What Is Limited Liability Partnership?
- LLP is a popular type of partnership where limited liability Partners enjoy protection of personal assets from debts, liabilities & damages. An LLP is a corporate body and legal entity separate from its partners. It has perpetual succession in every state and is registered under the LLP Act, 2008
- LLP is a popular type of partnership where limited liability Partners enjoy protection of personal assets from debts, liabilities & damages. An LLP is a corporate body and legal entity separate from its partners. It has perpetual succession in every state and is registered under the LLP Act, 2008
- An LLP (Limited Liability Partnership) is a corporate business structure that offers its members the benefit of limited liability, just like a company. It allows partners to manage internal affairs based on mutually agreed-upon terms, similar to a partnership firm. Partners have reduced liabilities for any future debts incurred in the course of running the business.
- An LLP combines features of both a corporate structure and a partnership firm, making it a hybrid entity that provides the best of both worlds. Partners are required to contribute to the LLP as specified in the LLP Agreement, and their contributions can take various forms, such as tangible or intangible assets, movable or immovable property, money, and cash.
- In an LLP, the Company itself is liable for any losses or debts incurred in business operations, which means individual members of the LLP are not personally responsible for such financial obligations.
Features Of Limited Liability Partnership
LLP is a Body of Corporate
As per Section 3 of the Limited Liability Partnership Act 2008 (LLP Act), an LLP is a corporate body established and registered under the Act. It exists as a distinct legal entity separate from its partners.
Perpetual Succession
Unlike a general partnership firm, a limited liability partnership has the advantage of perpetual succession. This means that even if one or more partners retire, become insolvent, suffer from mental incapacity, or pass away, the LLP can continue its operations. Additionally, the LLP has the capacity to enter into contracts and own property in its own name.
Separate Legal Entity
Similar to corporations or companies, an LLP is recognised as a separate legal entity. It holds full liability for its assets and obligations. Moreover, the individual partners’ liabilities are limited to their contributions to the LLP. As a result, the creditors of the LLP are not considered creditors of the individual partners.
LLP Agreement
The LLP Agreement is a contract agreed upon by all partners, outlining their rights and duties. Partners have the freedom to create the agreement according to their preferences. The Act will govern their mutual rights and duties if they don’t create one.
Artificial Legal Person
For legal purposes, an LLP is considered an artificial legal person. It is created through a legal process and possesses all the rights of an individual. It exists as an intangible, immortal entity but is not fictional since it has real existence.
Common Seal
An LLP may have a common seal if the partners use one (Section 14(c)). However, having a seal is not mandatory. If they choose to use a seal, it must be kept under the custody of a responsible official. The seal can only be affixed by at least two designated partners.
Limited Liability
Under Section 26 of the Act, each partner is an agent of the LLP for its business activities. However, a partner is not an agent of other partners. The liability of each partner is limited to their agreed contribution to the LLP, providing personal liability protection to all partners.
Minimum and Maximum Number of Partners
Every LLP must have a minimum of two partners, and at least two of them must be individuals serving as designated partners. At least one designated partner should always be a resident of India. There is no maximum limit on the number of partners in the LLP.
Business Management and Structure
The partners of the LLP have the authority to manage the business. However, only the designated partners are responsible for ensuring legal compliance.
Business for Profit Only
LLPs are specifically formed to conduct lawful business to earn a profit. They cannot be established for charitable or non-profit purposes.
Investigation
The Central Government holds the power to investigate the affairs of an LLP. They can appoint a competent authority for this purpose.
Mutual Agency
Unlike a partnership firm, in an LLP, actions taken by one partner independently and without authorisation do not make other partners liable. Each partner is considered an agent of the LLP, and the actions of one partner do not bind the others.
Requirements For Incorporating An LLP
- Minimum two partners allowed (Individual or body corporate)
- At least two designated partners are required, with one being an Indian resident
- A Digital signature certificate needed
- Mandatory to have an LLP name
- An LLP agreement is essential
- A registered office must be established.
LLP Name Structure
The name of an LLP must comply with the following requirements:
- It must contain the words ‘Limited Liability Partnership’ or the abbreviation ‘LLP’.
- It must not be identical or deceptively similar to the name of any other existing company or LLP.
- It must not contain any words or expressions that are obscene, offensive, or misleading.
Advantages Of Limited Liability Partnership
- Limited liability: The partners of an LLP are not personally liable for the debts and liabilities of the LLP. This means that their assets are protected if the LLP becomes insolvent.
- Pass-through taxation: LLPs are taxed as pass-through entities, which means that the income of the LLP is taxed directly in the hands of the partners. This avoids double taxation when companies distribute their profits to shareholders.
- Flexibility: LLPs are relatively flexible regarding their management structure and ownership. The partners can agree on any management structure they choose, and there are no restrictions on transferring ownership interests.
LLP Registration Fees
Details of Fee
**Subject to change as per the state requirements, additional professional fees incurred.
For registration of Limited Liability Partnership, including conversion of a firm or a private company or an unlisted public company into Limited Liability Partnership:
| CONTRIBUTION AMOUNT | FEE (IN INR) |
| ₹ 1 to ₹ 1,00,000 | ₹ 500 |
| ₹ 1,00,001 to ₹ 5,00,000 | ₹ 2,000 |
| ₹ 5,00,001 to ₹ 10,00,000 | ₹ 4,000 |
| ₹ 10,00,001 and above | ₹ 5,000 |
The difference between the fees payable on the increased slab of contribution and the fees paid on the preceding slab of contribution shall be paid through Form 3.For filing, registering or recording any document, form, statement, notice, Statement of Accounts and Solvency, annual return, and an application along with the Statement for conversion of a firm or a private company or an unlisted public company into LLP by this Act or by these rules required or authorized to be filed, registered, or recorded:-
| CONTRIBUTION AMOUNT | FEE (IN INR) |
| ₹ 1 to ₹ 1,00,000 | ₹ 50 |
| ₹ 1,00,001 to ₹ 5,00,000 | ₹ 100 |
| ₹ 5,00,001 to ₹ 10,00,000 | ₹ 150 |
| ₹ 10,00,001 and above | ₹ 200 |
Fee for any application other than the application for conversion of a firm or a private company or an unlisted public company into LLP shall be as under:-
| APPLICATION TYPE | FEE (IN INR) |
| An application for reservation of name u/s 16 | ₹200 |
| An application for direction to change the name u/s 18 | ₹ 10,000 |
| Application for reservation of name under Rule 18(3) | ₹ 10,000 |
| Application for renewal of name under Rule 18(3) | ₹ 5,000 |
| Application for obtaining DPIN under Rule 10(5) | ₹ 100 |
Fee for Inspection of documents or for obtaining a certified copy thereof shall be as under:
| INSPECTION TYPE | FEE (IN INR) |
| For inspection of documents of an LLP under section 36 | ₹ 50 |
| For Copy or extract of any document under section 36 to be certified by Registrar | ₹ 5/- per page or fractional part thereof |
Important Forms In LLP Registration
| DESCRIPTION | E-FORM WITH INSTRUCTION KIT | E-FORM |
| Application for reservation or change of name | Form 1 | Form 1 |
| Incorporation document and subscriber’s statement | Form 2 | Form 2 |
| Details in respect of designated partners and partners of Limited Liability Partnership | Form 2A | Form 2A |
| Information with regard to limited liability partnership agreement and changes, if any, made therein | Form 3 | Form 3 |
| Notice of appointment, cessation, change in name/address/designation of a designated partner or partner, and consent to become a partner/designated partner | Form 4 | Form 4 |
| Notice for change of name | Form 5 | Form 5 |
| Annual Return of Limited Liability Partnership (LLP) | Form 11 | Form 11 |
| Notice for change of place of registered office | Form 17 | Form 17 |
| Application and Statement for conversion of a private company/unlisted public company into limited liability partnership (LLP) | Form 18 | Form 18 |
| Application for direction to Limited Liability Partnership (LLP) to change its name to the Registrar | Form 23 | Form 23 |
| Application for reservation/renewal of name by a Foreign Limited Liability Partnership (FLLP) or Foreign Company | Form 25 | Form 25 |
| Return of alteration in the incorporation document or other instrument constituting or defining the constitution; or the registered or principal office; or the partner or designated partner of limited liability partnership incorporated or registered outside India | Form 28 | Form 28 |
| Application for compounding of an offence under the Act | Form 31 | Form 31 |
| Form for filing addendum for rectification of defects or incompleteness | Form 32 | Form 32 |
HIGHLIGHTS
- The agreement must be submitted to the Ministry of Corporate Affairs (MCA) within 30 days from the date of incorporation. Failure to do so will result in a penalty of Rs. 100 per day until the actual filing date.
- The filing is done using LLP form-3, which remains the same as in the previous process. The verification and approval are now processed by the concerned State Registrar of Companies (ROC) instead of the Central Registration Centre (CRC).
- The name allotted under LLP-RUN will be reserved for a duration of 90 days. If the LLP registration application (FiLLiP) is not filed within this period, the name reservation will expire and can be reserved again through a new application.
- FiLLiP allows for the allocation of only 2 DPIN/DIN (Designated Partner Identification Number). If there are more than 2 designated partners, the additional partners will need to obtain DPIN/DIN by filing DIR-3 after the incorporation process. Subsequently, the LLP can add new designated partners or change the designation of partners as required.
- The certificate of incorporation serves as conclusive evidence that the limited liability partnership is incorporated under the specified name.
- The Registrar of Companies (ROC) assigns a unique Limited Liability Partnership Identification Number (LLPIN) to every registered LLP.
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