Key things to know when registering a LLP


By Tanvi Loond

A Limited Liability Partnership (LLP) is a hybrid business structure that combines the best aspects of a Partnership and a Company.

The LLP Bill, 2006 was introduced in the Rajya Sabha on December 15, 2006 to combine the tax status of a partnership structure with the advantage of limited liability for its partners.

Some of the features of an LLP are:

Separate Entity

An LLP is a separate legal entity, that is, it can own properties in its name, it can sue and be sued in its name and its continuity does not depend on its partners, who may change from time to time

Limited Liability

Partners are liable to the extent of their contribution to the firm. Unlike a partnership firm, partners in an LLP are not liable to the outside creditors.

Ease of running the business

The formation and running of an LLP requires lesser compliances when compared to the formation and running of a Company

Membership

The following can be partners in an LLP:

  • Individuals
  • Limited Liability Partnerships
  • Foreign Limited Liability Partnerships
  • Companies
  • Foreign Companies

Incorporation of an LLP

Limited Liability Partnership Act 2008 (the Act) is the governing Act for incorporation of an LLP. The Act mandates a minimum of two partners to create an LLP but there is no limit regarding the maximum number of partners. In this article, we throw light on the steps to be followed while incorporating an LLP.

Step 1: Application for Digital signature Certificate and Designated Partner Identification Number

Every individual who is intending to be appointed as designated partner of an LLP shall make an application for a Digital Signature Certificate (DSC). A DSC is mandatory to digitally sign all forms to be filed electronically on the
MCA portal. A DSC can only be obtained from government recognized
Certifying Agencies.

READ  Aquaconnect raises $1.1 million seed round from Omnivore and Hatch

Once the DSC is obtained, the partners shall make an application in Form DIR-3 for obtaining Designated Partner Identification Number (DPIN). This is mandatory in order to be appointed as designated partner under the Act. While filing Form DIR-3 the applicant must attach a proof of identity along with a proof of residence.

Step 2: Reservation of name of the LLP

An applicant must get a name reserved for any new LLP to be incorporated or for any conversion of a firm / company into LLP. An application for reserving the proposed name shall be made through the
MCA portal. This application is made by filing Form Reserve Unique Name-LLP (RUN-LLP). Once the name reservation request has been submitted, it will be checked and, if found feasible, approved by the Central Registration Centre (CRC). The applicant will receive an email from the CRC advising the outcome of the name reservation request.

Once a name is approved, the applicant can apply for incorporation of the LLP, before expiry of the validity of approved name, that is, three months from the date of approval. Form RUN-LLP has to be filed with a fee of Rs 200.

Step 3: Registration of LLP

Once the name has been reserved, the applicant has to file an LLP Integrated Incorporation form (FiLLiP) through the MCA portal. This form requires details such as particulars of the proposed or approved name of the LLP, business activity to be carried out by the LLP, proof of address of registered office of the LLP, subscriber’s sheet including consent, details of the designated partners along with the DPIN, Total monetary value of contribution by partners in the LLP etc.

READ  Oil dips as U.S.-China trade deal hopes fade

Form FiLLiP has to be filed with the following fee along with the applicable Stamp Duty

garph1

Step 4: Certificate of Incorporation

Upon successful registration of the LLP, the RoC shall issue a Certificate of Incorporation in Form 16 under the seal of the Registrar. This certificate contains the LLP Identification Number (LLPIN)

Step 5: Limited Liability Partnership Agreement

LLP Agreement is the document that defines the relationship between the partners and their rights and duties vis-à-vis the LLP. The partners can enter into this agreement upon registration of the LLP. An LLP agreement lays down terms and conditions for admission and removal of partners, consequences of death of a partner, sharing of profit and loss, dispute resolution, partners’ duties and responsibilities, among others. If the agreement has been executed before incorporation, the partners have to ratify the agreement after registration and have to file Form 3 with the RoC within 30 days of incorporation.

Form 3 has to be filed with the following fee along with the applicable Stamp Duty

graph 2

In case no agreement has been executed, the relationship between the partners and the partners and the LLP will be governed by the First Schedule of the Act.





READ SOURCE

LEAVE A REPLY

Please enter your comment!
Please enter your name here