What is limited liability partnership

INTRODUCTION:

Limited Liability Partnership (LLP) is a body corporate formed by 2 or more partners is legal entity separate from that of its members, partners having limited liability. LLP is governed by The Limited Liability Partnership Act, 2008.

NO OF PARTNERS:

  • MINIMUM- 2
  • MAXIMUM- NO LIMIT

Among the partners there should be minimum 2 Designated Partners who shall be individuals, and at least one of them should be a Resident in India.
FEATURES:
• PERPETUAL SUCCESSION: An LLP will continue its business regardless of possible partner change.. The LLP continues to exist until it is wound up or struck off.

CAPACITY TO SUE AND TO BE SUED: Capacity means the legal competence of person. One can sue both the partnership and its partners, for damages and liability

NO LIMIT ON NO. OF OWNERS: Minimum 2 partners and there is no upper limit on Maximum no. of partners.

LOWER COST TO REGISTER: The cost of registering LLP is low as compared to the cost of incorporating a private limited or a public limited company.

NO REQUIREMENT OF COMPULSORY AUDIT:  LLP, whose turnover does not exceed  in any financial year 40 lakh rupees, or whose contribution does not exceed 25 lakh rupees, is not required to get its accounts audited.

MUTUAL AGENCY: Action of one partner does not bind others. independent or unauthorized action of one partner does not make other partners liable.

SEPARATE LEGAL ENTITY: Just like a company, LLP also have a separate legal entity. it can hold properties on its own name, can sue and be sued etc.

COMMON SEAL: If the partners decide, the LLP can have a common seal [Section 14(c)]. it is not mandatory. if it decides to have a seal, then it should be kept with a responsible person and can be affixed in a presence of 2 designated partner.
LIMITED LIABILITY: According to Section 26 of the Act, every partner is an agent of LLP and not of the partners, every partner's liability is limited to the extent of his agreed contribution.

NO DIVIDEND DISTRIBUTION TAX: LLP is liable for payment of income tax and share of its partners in LLP is not liable to tax. Thus no dividend distribution tax is payable.

REGISTRATION:

OBTAIN DIGITAL SIGNATURE CERTIFICATE (DSC):  All the documents are required to filed online and required to be digitally signed. therefore, before registration designated partners should apply for digital signature.

APPLY FOR DIRECTOR IDENTIFICATION NUMBER(DIN):  All the designated partners or those intending to be designated partner of the proposed LLP should apply for DIN.  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.

NAME APPROVAL: LLP-RUN(Limited Liability Partnership-Reserve Unique Name) is filed for the reservation of name of proposed LLP which shall be processed by the Central Registration Centre under Non-STP. The form RUN-LLP has to be accompanied with fees as per Annexure ‘A’ which may be either approved/rejected by the registrar. A re-submission of the form shall be allowed to be made within 15 days for rectifying the defects. There is a provision to provide for 2 proposed names of the LLP.

INCORPORATION OF LLP:   FiLLiP(form for incorporation of Limited Liability Partnership) shall be filed with registrar. The form will be an integrated form. fees will be as per Annexure 'A' shall be paid.

FILE LLP AGREEMENT: It governs the mutual rights and duties between the partners and also between the LLP and partners. LLP agreement must be filed in FORM 3 online on MCA Portal. it should be filed within 30 days from the date of incorporation.

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