What is LLP?
LLP stands for Limited Liability Partnership is the hybrid of partnership Firms and companies in which two or more persons have agreed to share the profit of the business in which partners enjoy the limited liability.
In LLP personal assets shall not be used for paying off debts of Firm. Any partner shall not be liable or responsible for other partner’s misconduct.every one is liable for their acts.
It is the easiest form of business to incorporate and organized their business in India as it has an easy incorporation process, and less compliance.it is most preferred by the professionals, micro and small businesses.
Provision of the Indian Partnership Act, 1932 shall not apply to LLP as it is governed by the provisions of the Limited Liability Partnership Act 2008.
LLP is the hybrid of partnership and company
LLP-Limited Liability Partnership is
- Separate legal entity distinct from its partners
- It is body corporate incorporated formed and incorporated under this Act.
- Perpetual existence,partners may come & go but it will not affect its existence.
- Minimum two partners, no limit for maximum.
The LLP Registrations are set to be a smooth process as a new process of LLP registration has been launched by ROC.
Type of Partners
There are basically two type of partners are:
- Normal Partner-The liability of the partner is limited and solely responsible up to the LLP agreement.
- Designated Partners-The designated responsible up to the liability act in an LLP agreement and Liable to all penalties imposed on LLP for any contravention of all the act provisions.
How to Register an LLP?
LLP is an alternative corporate business form that gives the benefits of limited liability as present in a company, and the flexibility of partnership business.
Basic Requirement to start an LLP
Minimum Two Persons
An LLP can be started by at least two partners. However, there is no limit to the maximum no of partners.
The minimum Capital with which an LLP can be incorporated is Rs 10000/- however, there is No upper Limited.
One designated partner must be resident in India by staying for at least 182 days in India, during the preceding Financial year.
The name of an LLP should not resemble an existing company, LLP or a registered or applied trademark in India.
Who can be partners in LLP?
- An individual or body corporate may be a partner in LLP.
- Individuals shall not become partners in LLP if
- Found unsound Mind by court
- An undischarged insolvent
- applied to be adjudicated as an insolvent & his application is pending.
In LLP there shall be minimum two designated partners who shall be individual among them. At least one designated partner shall be resident in India.
Documents for Registered Office & Statutory Form
- Proof of registered office(Utility Bill-Latest Bill not older than 3 months)
- NOC from the owner of premises
- signed declaration from partners
Documents of Designated Partner
- Two photograph of partner
- Pan card of partners
- ID proof of partners
- Address proof of partners (latest Proof of registered office(Utility Bill-Latest Bill not older than 3 months)
Liabilities of Partners in LLP
- Liability of partners shall be limited except in case of unauthorized acts, frauds, and negligence.
- Obligation of LLP arising or otherwise shall be obligation of LLP only. Every partner for Business of LLP is agent of LLP. Not agent of other partners, So not be Personally Liable for wrongful acts or omission of any other partner.
- They are Responsible for all acts,matters, and things required to be done by LLP for compliance of legal provisions.
- Filling of any,documents,return,statement and report in compliance of provisions of the act and as per LLP agreements.
- Liable to all penalties imposed on LLP for any contravention of all the act provisions
If LLP Partners are Less than Two?
- LLP shall have at least Partners.
- If any time the partners In LLP are reduced to below 2
- it cannot carry business for more than six months from the reduction of partners.
- If the LLP carries on Business for more than six months while the number is reduced than
a. the remaining partner after six months carrying business
b. and having the knowledge that he is carrying business alone through LLP
c. shall be personally Liable for obligation during such period
Advantages of LLP
LLP is flexible as compared to the company and convenient form of Business as the rise of duties of partners are governed by LLP agreement and partners have the flexibility to design the agreement as per their choice
No Minimum Capital Requirement
There is no requirement for minimum mandatory capital contribution as they can contribute as per their choice.
Minimum Registration Cost
LLP can register with minimum registration costs as compared to the company.
Audit of Accounts not Compulsory
Audit of Books of accounts is not compulsory in LLP. The only required to be audit when the capital contributions exceed 25 Lakh or turnover is Rs 40 Lakh.
No Limit on Number of Partners
In LLP there is no maximum limit for the partners to enter in LLP.
As compared to the private or public limited company they have less compliance, generally there are two forms is filled form 8, form 11 annually.
Frequently Asked Questions?
What is LLP?
It is a form of business that is basically a partnership firm but in LLP the liability of partners is limited.
What is the minimum number of partners required in LLP?
In LLP there are minimum of two partners are required in LLP.
Is it compulsory to require an LLP agreement?
Yes, it is compulsory to require the LLP agreement which has to notarize in stamp paper, and the stamp duty of agreement is to decide according to the state choice.
What are the benefits of LLP?
The following are the benefits of LLP-
- Simple registration process
- less compliance
- liabilities of partners limited
- there is no maximum limit for partners
- Audit is not compulsory
Who can be partners?
- An individual or body corporate may be partner in LLP.
- Individual shall not become partner in LLP if
a. Found unsound Mind by court
b. An undischarged insolvent
c. Any applied to be adjudicated as an insolvent & his application is pending.