Limited Liability Partnership (LLP) has become a preferred form of organization among entrepreneurs as it incorporates the benefits of both partnership firm and company into a single form of organisation.
The concept of the Limited Liability Partnership (LLP) was introduced in India in 2008. An LLP has the characteristics of both the partnership firm and company.
The Limited liability Partnership Act, 2008 regulates the LLP in India. Minimum two partners are required to incorporate an LLP. However, there is no upper limit on the maximum number of partners of an LLP.
Among the partners, there should be a minimum of two designated partners who shall be individuals, and at least one of them should be resident in India.
The rights and duties of designated partners are governed by the LLP agreement. They are directly responsible for the compliance of all the provisions of the LLP Act, 2008 and provisions specified in the LLP agreement.
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.
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. 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.
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 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.
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.
A Limited Liabilty Partnership firm (LLP) is a hybrid structure between a partnership firm & a private limited company where the business is carried out in a corporate framework, guided by terms of the mutually adopted partnership deed.
Liability- In a general partnership firm, partners are personally liable for debts of the business which means that even their personal property may be used to settle the firm’s debts. Whereas, the liability of partners is limited in case of an LLP.
Immunity against wrong doings of other partners- Under LLP structure, partners are not responsible for negligence or misconduct of other partners whereas in general partnership firms, partners can be held responsible.
Both general partnerships and LLPs are taxed at flat rate of 30%. All the other income tax act provisions apply similarly except that general partnership firms are covered under presumptive taxation scheme i.e if turnover is below Rs. 2 crore in business or Rs. 50 lakh in case of profession, there is no need to maintain books of accounts or get accounts audited whereas, LLPs are explicitly not covered.
There is no minimum capital contribution requirement. It can be registered even with Rs. 100 as total capital contribution.
Accounts of an LLP are required to be audited when the turnover is Rs. 40 lakh or more or when the total capital contribution is Rs. 25 lakh or more.
The auditor of an LLP is appointed annually by the designated partners. The first auditor is appointed before the end of the financial year. Subsequent appointment or reappointment of the auditors is made one month before the closing of the financial year by the designated partners.
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