Limited Liability Partnership

What is Limited Liability Partnership?

A limited liability partnership (LLP) is a partnership in which some or all partners have limited liabilities. It therefore can exhibit elements of partnerships and corporations. In an LLP, each partner is not responsible or liable for another partner's misconduct or negligence. 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 right to manage the business directly. In India, Limited Liability Partnership form of business is regulated by Limited Liability Partnership Act, 2008.

Advantages of Limited Liability Partnership

• Convenient: -It is easy to start and manage a business like entrepreneurs. LLP agreements are customized in according to meet the needs of partners concerned. There is fewer formalities in areas of legal compilation, annual meeting, resolution as compared to any other Corporation.
• No minimum capital requirement:-LLP can be started with the minimum amount of capital money. Capital may be in the form of tangible, movable asset like Land, machinery or intangible form. There is no threshold limit prescribed in law to incorporate a LLP.
• No limit on owners of business:-LLP may have partners varying from 2 to many. There is no limit for partners in LLP. An LLP requires a minimum 2 partners while there is no limit on the maximum number of partners unlike as in case of a private company with restriction of 200 members.
• Lower Registration Cost:-The cost of registration of LLP is low as compared to any other company (Public or Private).
• No requirement of compulsory Audit: LLPs are not required to audit the accounts like any other company (Public, Private). LLP is required to audit their account in the following situation:
I. When the contributions of the LLP exceeds Rs. 25 Lakhs, or
II. When annual turnover of the LLP exceeds Rs. 40 Lakhs
• Savings from lower compliance burden:LLP have to face less compliance burden as they have to submit only two statements i.e. the Annual Return & Statement of Accounts and Solvency.
• Taxation Aspect on LLP:LLP is not liable to pay the tax on the income and share of its partner. Thus, no dividend distribution tax is payable as under section 40(b). Bonus, commission or remuneration, Interest to partners, any payment of salary, allowed as deduction. Provision of ‘deemed dividend’ under income tax law, is not applicable to LLP.

Procedure for the Registration of Limited Liability Partnership

1) The first step is to obtain a Digital Signature Certificate (DSC) by all the Directors. Documents required to obtain DSC are:

• PAN Card of the Director
• Aadhar card of the Director
• Photo
• Email ID
• Contact Number

2) After obtaining DSC, the next step is to obtain the Designated Partner Identification Number (DPIN) by filing form DIR-3 along with a self-attested identity proof, address proof and a photo.

3) Apply for the name of the LLP to be registered by filing Form 1 (Application for reservation or change of name) for the same. After that depending upon the proposed LLP, file required incorporation Form 2 (Incorporation document and Subscriber’s statement). Once the form has been approved by the concerned official of the Ministry, the status of the form will get changed to Approved.s

4) After incorporation of LLP, an initial LLP agreement is to be filed within 30 days of incorporation of LLP. The user has to file the information in Form 3 ( Information with regard to Limited Liability Partnership Agreement and changes, if any, made therein).

5) Verification of documents / forms by ROC and Issue of Certificate of Incorporation by ROC

Documents required for Registration of Limited Liability Partnership

1. Passport size photograph of all partners.

2. Firm Name (1 to 6) with Registered Office.

3. Self-Attested Pan Card of all partners .

4. Self-Attested Address proof of all partners (like Aadhar Card, Voter’s ID, Passport, Driver’s license)

5. Residence proof of all partners (like Latest bank statement, telephone bill, mobile bill, electricity bill or gas bill)

6. Name of Products / Services in which Your Firm is dealing.

7. If Business Property is own provide Electricity Bill or Legal Ownership Documents other-wise Provide Rent Agreement.