Formation of Limited Liability Partnership (LLP)
The limited liability partnership ('LLP') is viewed as an 'alternate corporate vehicle' which seeks to attain the principal benefits of both forms of business organization- partnerships and companies. This is achieved by granting, to the members of the LLP, the flexibility of organizing their internal managerial structure as a partnership based on mutual agreement, while limiting the liability of the partners to the extent of their interest in the partnership, which is akin to the separate legal personality of a company. Since the benefits of similar business organizations have been incorporated into this new business form, it is necessary to highlight the advantages of the LLP over such similar business forms. It is as a result of these very advantages that LLPs, as business vehicles, have been allowed in several jurisdictions and multiple pieces of legislation have been enacted to regulate them.
The primary distinction between an LLP and a general partnership is that a general partnership has no legal existence separate from the partners who constitute it, while an LLP exists as a legal entity separate from its partners. In a general partnership, every partner is liable jointly along with the other partners of the firm, and also severally, for all acts of the firm done while he is a partner. In an LLP, however, no partner is made liable for the actions of another partner beyond his/her share in the partnership. Further, unlike a partnership, members of an LLP are not agents of each other.
Key Features of LLP Act
• The Limited Liability Partnership (LLP) is governed by Limited Liability Partnership (LLP) Act, 2008 and Limited Liability Partnership Rules, 2009.
• LLP shall be a body corporate and a legal entity separate from its partners. It will have perpetual succession like a corporation.
• There shall not be any upper limit on number of partners in an LLP unlike an ordinary partnership firm where the maximum number of partners cannot exceed 50
• While the LLP will be a separate legal entity, liable to the full extent of its assets, the liability of the partners would be limited to their agreed contribution to the LLP. Further, no partner would be liable on account of independent or unauthorized actions of other partners, thus allowing individual partners to be shielded from joint liability created by another partner's wrongful business decisions or misconduct.
• The framework of LLP is not restricted to professional services alone. Several business activities can be undertaken using the LLP structure.
Know About Digital Signature
What is a Digital Signature Certificate (DSC)?
The Information Technology Act, 2000 provides for use of Digital Signatures on the documents submitted in electronic form in order to ensure the security and authenticity of the documents filed electronically. This is the only secure and authentic way that a document can be submitted electronically. As such, all filings done by the companies under MCA21 e-Governance program are required to be filed with the use of Digital Signatures by the person authorized to sign the documents.
You can use only the valid Digital Signatures issued to you. However it is not lawful to use digital signature of someone else by way of impersonation.
Office of the Controller of Certification Agencies (CCA) under the provisions of IT Act, 2000 appoints Certification Agencies. A total of seven Certification Agencies have been authorized by the CCA to issue the Digital Signature Certificates (DSCs). The details of these Certification Agencies are available on the portal of the Ministry of Corporate Affairs.
Class of DSC
The Ministry of Corporate Affairs has stipulated a Class-II or above category signing certificate for e-filings under MCA21. A person who already has the specified DSC for any other application can use the same for filings under MCA21 and is not required to obtain a fresh DSC.
Required documents for getting DSC:
• Specified Form filled as per given guidelines
• ID proof of the applicant (Copy of the PAN card should be attested by the Gazetted officer/Bank manager/Post master).
• Address proof (Passport/Aadhar card/Driving License/Voter Id/Latest Utility Bill like Electricity bill, Telephone bill, Water bill, Gas bill, etc, Property Tax receipt). This needs to be attested by a Gazetted officer/ Bank manager/ Post master.
• Passport size photo(3.5 cm X 2.5 cm)
The concept of a Designated Partner Identification Number (DPIN) has been introduced In Limited Liability Act (2008). As such, all the existing and intending designated partners have to obtain DPIN within the prescribed time-frame as notified.
DPIN is a unique identification number allotted to an individual who is an existing partner of the LLP or intends to be appointed as partner of an LLP. DPIN is an 8 digit number. For example: 02165789.This is allotted by Central Government (office of regional director), Ministry of Corporate Affairs.
Required documents/information’s for Allotment of DIN
• Self attested* copy of the PAN Card
• Self attested* identity proof of the proposed partners (like Voter ID Card/ Valid Driving License/ Valid Passport/ Aadhar Card etc).
• Self attested* Address proof of the proposed partners (like Latest Bank Statement/ Telephone or Mobile Bill/ Electricity Bill etc).
• Passport size color & clear photograph (3.5 cm X 2.5 cm)
• An specified Affidavit by the individual (Declaration by the individual and self attested*)
• Educational Qualification
• Current Occupation
• Valid Email Id and Mobile Number
*Signature should be same as in PAN card.
Before you fill-in applications for DPIN please remember following common causes of REJECTIONS
• Applicant's name and father's name mentioned in abbreviated form: The Name should be expanded even if the ID proof contains the name in abbreviated form.
• Mismatch in the applicant’s name and father's name in DPIN form with the ID (Identity) proof enclosed: Any mismatch in name, including spelling mistake, may lead to rejection of application. Minor spelling deviations in the father's name may be accepted, if such deviations do not materially impact the name.
• Prefixes like Mr/ Ms/ Kumari/ Shri/ etc. used in the applicant's name.
• Residence proof(s) like Bank Statements, Electricity Bill, Telephone Bill, Utility bills, etc, submitted are older than 2 months of submitting the application for verification such documents are in the name of some other person, for example father or spouse.
• The supporting documents are not duly attested by the proposed partners.
• Passport/Driving License/Identity proofs/etc attached is expired: Only such documents which are currently valid should be attached.
• The signature is not the same with the signature in the PAN card.
Name Search and application for Name Availability
Next step in the formation of a LLP company is the approval of the name by the Registrar of Companies (ROC) in the State/Union Territory in which the LLP will maintain its Registered Office. This approval is provided subject to certain conditions: for instance,
• There should not be an existing LLP by the same name
• The first word must contain a noun and the second word must relate to the main object of the proposed LLP
• The last words in the name are required to be 'LLP'
• The application should mention at least two suitable names to maximum 6 names of the proposed LLP, in order of preference
Once LLP name is approved, it is valid for a period of sixty days from the date of application, within that time LLP Agreement together with miscellaneous documents should be filed. If one is unable to do so, an application may be made for renewal of name by paying additional fees.
Information required for seeking Name Approval
• Proposed name of the LLP and alternative names (2 to 6 names)
• Names of the proposed partners (minimum 2)
• Authorized share capital
• Main objects of the LLP in brief (200 alphabetic words)
• Address proof for registered office of the proposed LLP
• Address for the nearest police station of proposed registered address of the LLP
• NOC, if the partner is carrying on any Partnership firm, sole proprietary or unregistered entity in the name as applied.
• NOC from the person if the proposed name(s) contain(s) name of any person other than partner(s) or their close blood relatives.
• If the proposed name(s) include(s) the name of relatives then the proof of relationship is also required.
I. Form 2
The following information/documents required in Form 2:
• Get the subscription sheet by all the designated partners in their own handwriting with the following details as per the given order:
- The name of the designated partners
- Father’s name of the designated partners
- Address of the designated partners
- Occupation of the designated partners
The subscription sheets of LLP must mention the number of monetary value of the authorized capital shared by the promoters in ratio.
• Consent by the designated partners
• If property is owned by the proposed partners, then;
- Registered proof in the name of the partner like latest Electricity Bill, Telephone/ Mobile bill, Gas bill, Water Bill
- NOC from the proposed partner to use the premises
• If the property is owned by other than proposed partners, then;
o Rent agreement between the land lord and proposed LLP through its proposed partners
o Registered address proof in the name of the landlord like latest Electricity Bill, Telephone/ Mobile bill, Gas bill, Water Bill
o NOC from the landlord to use the premises
II. After this, incorporation certificate having CIN (corporate identification number) like AAD-1919 will be obtained.
III. After getting Certificate of Incorporation, Form 3 is uploaded with LLP Agreement to get approval from ROC.
IV. The certificate of incorporation will be required while opening the current bank account in LLP name.
Following documents/ forms need to be submitted along with requisite fee which is based on the amount of authorized capital as under:
Documents/Information Required During Process
Availability of Name for a New Company.
Application or declaration for incorporation of a LLP along with subscriber’s sheet and consent of partners.
Approval of LLP Agreement.