Limited Liability Partnership (LLP) combines the benefits of LLCs and partnerships. LLPs were introduced in the Rajya Sabha on December 15, 2006 to combine partnership tax advantages with limited liability.
Ease of running the business
It is easier to form and operate an LLP than a company because it must adhere to fewer regulations.
The following can be partners in an LLP:
- Limited Liability Partnerships
- Foreign Limited Liability Partnerships
- Foreign Companies
- Incorporation of an LLP
According to the Limited Liability Partnership Act 2008 (the Act), a limited liability partnership is incorporated. In an LLP, there is no limit on the number of partners, but the Act requires two partners at a minimum. The steps outlined in this article should be followed when incorporating an LLP.
Step 1: Application for Digital signature Certificate and Designated Partner Identification Number
LLP designated partners are required to obtain a Digital Signature Certificate (DSC). For electronic submission of forms through the MCA portal, a DSC is required. Only government-recognized certifying agencies can provide DSCs.
Form DIR-3 can be submitted after the DSC has been obtained to obtain the Designated Partner Identification Number (DPIN). This requirement must be met for you to be considered a designated partner under the Act. Form DIR-3 requires both proof of identity and proof of residence.
Step 2: Reservation of name of the LLP
If a new LLP is to be incorporated or if a firm or company is being converted into an LLP, a name must be reserved. A reservation application must be submitted through the MCA portal. The Reserve Unique Name-LLP (RUN-LLP) form must be filled out in order to make this application. A name reservation request will be checked by the Central Registration Centre (CRC) and, if feasible, approved.
Step 3: Registration of LLP
A LLP Integrated Incorporation Form (FiLLiP) must be filed after the name has been reserved. Details of the proposed or approved name of the limited liability company, the business activity of the limited liability company, the address of the registered office of the limited liability company, and the subscriber’s form, which includes consent, the names and DPINs of the designated partners, as well as the total contribution of each partner.
Step 4: Certificate of Incorporation
When LLPs are successfully registered, they receive an Incorporation Certificate in Form 16. The LLP Identification Number (LLPIN) appears on this certificate.
Step 5: Limited Liability Partnership Agreement
As outlined in an LLP Agreement, the partners and LLP have rights and duties. This agreement may be entered into by partners upon registration of their LLP. The LLP agreement describes the duties and responsibilities of partners, as well as the terms and conditions for admitting or removing partners, the consequences of death, and how profit and loss are distributed. Form 3 must be filed with the RoC after the partners ratify the agreement after registration.
No agreement being executed will govern the relationship between the partners and the LLP, which is governed by the First Schedule.