LLP – Overview
LLP stands for Limited Liability Partnership. This unique type of business structure combines the characteristics of a typical partnership with the advantages of limited liability for its partners.
People favor this type of corporate entity over other types of business structures because it offers a greater degree of flexibility than other types of businesses.
This kind of corporate structure has developed and is employed in various common law nations, including the United Kingdom, South Africa, and New Zealand.
Typically, this type of entity is chosen by law firms, accounting firms, private equity, venture capitalists, architects, and real estate firms. Utilizing this type of corporate structure has several advantages, including reduced liability and simplified regulatory requirements. Therefore, individuals and business owners like registering as limited liability partnerships. The convenience of doing business is another benefit of forming an LLP.
Meaning of LLP
It’s crucial to initially comprehend what a partnership is in order to comprehend what a limited liability partnership means. A partnership is a type of contract or agreement between two or more people to carry out a specific type of business operations with the shared aim of splitting the company’s gains and losses. The Indian Partnerships Act, 1932, contains this definition.
According to the Limited Liability Partnerships Act of 2008 (LLP Act), Limited Liability Partnerships (LLPs) are unique entities with the characteristics of a typical partnership and the status of limited liability possessed by private limited companies. LLPs were introduced in India in the year 2010. Any obligations that result from the partnership shall be addressed in accordance with the relevant LLP Act agreement.
Advantages of LLP
The following advantages can be enjoyed by an applicant going for Limited liability partnership registration:
Limited liability is one of the key benefits of registering a limited liability partnership. When the debts are not paid, partners in this type of corporate organization would not have any concerns. The limited liability theory prevents creditors from seizing the partners’ personal assets to satisfy debts owing by the LLP.
The advantages of a traditional partnership
The advantages of a conventional partnership are another benefit that this type of company organisation has. For this type of entity, for instance, minimum compliance is enforced.
Ownership can be transferred with ease.
In contrast to other types of corporate formations, it is simple to transfer ownership of an LLP. People so prefer to register as limited liability partnerships.
Independent and distinct legal entity
The idea of a separate and independent legal entity is one of the things that appeals to business owners about this structure. These advantages are available to the business’s partners.
This would imply that the LLP would continue to operate from the formation of the partnership until it was closed by a regulatory authority’s decision or directive.
Conflicts and the LLP Agreement
People who register for limited liability benefits from the capacity to settle issues in an acceptable manner. An LLP agreement is written for a limited liability partnership entity, much like a shareholders agreement is written for a private limited company. Any type of disagreement between the partners can be readily settled through the terms of this agreement.
Compared to other types of business entities, an LLP has fewer compliance requirements. For the Limited Liability Partnership Registration, for instance, no minimum capital requirement exists. Other than this, doing an audit is not necessary. This criterion, however, only applies if the LLP’s annual turnover is less than 40 and 25 lakhs.
Eligibility for LLP
Requirement for Partners
For a limited liability partnership to be registered in India, a certain number of partners are required. For an LLP, two partners are required at a minimum.
A business may also be categorized as an LLP partner.
One of the Partners must be an Indian citizen.
A limited liability partnership must include at least one Indian national among its partners. In India, this is a prerequisite for LLPs.
Each LLP partner must get a defined partnership identity number (DPin).
Office’s address in the real world
In addition, the office needs a real physical location to conduct regular interaction with various regulatory bodies. According to the 2008 Limited Liability Partnerships Act, this criteria must be met.
For all partners, DSC
All of the LLP’s partners must obtain digital signature certificates, which is a necessity. This would make it easier to store documents and signatures electronically and digitally.
The following paperwork and forms must be submitted in order to register a limited liability partnership:
- Address proof
- Identification documents for each partner, including a PAN, Aadhaar, voter ID, and driving license
- Photographs, a passport, and a visa if one of the partners is a foreign national serve as proof of residence.
- Certifications for digital signatures
- If the office is rented out, the no-objection certificate is required.
- Utility Bill—such as a water or power bill—Address Verification of the Registered Office of the LLP
Following incorporation, the LLP must comply with a number of post-compliant criteria.The LLP must adhere to the following conditions after incorporation:
- Establishing a Bank Account on the LLP’s Behalf
- Obtaining a PAN and TAN for the LLP
- submitting the LLP agreement to the appropriate regulatory body using Form 3.
The business can start after these procedures for limited liability partnership registration are finished.