Limited Liability Partnership is a new corporate structure that combines the flexibility of a partnership and the advantages of limited liability of a company at a low compliance cost. In other words, it is an alternative corporate business vehicle that provides the benefits of limited liability of a company, but allows its members the flexibility of organizing their internal management on the basis of a mutually arrived agreement, as is the case in a partnership firm.
The process for incorporation of LLP is given below:
Step 1: Decide on the partners and the designated partners.
- The minimum number of partners to incorporate a LLP is two; they may be individuals or body corporate who may be acting through their representatives.
- There is no upper limit on the maximum number of partners of LLP.
- Out of the partners two shall be designated partners one of whom shall be resident in India
Step 2: Obtain Director Identification Number (DIN) and a digital signature certificate.
The concept of DIN has been implemented under MCA21 e-Governance. All those who are intending to be Partners are required to apply for allotment of DIN 1. A fee of Rs. 100 is chargeable by MCA for this purpose. Applicant can apply for DIN through below link-
http://mca.gov.in/MCA21/dca/din/DIN.html
A Digital Signature Certificate, like hand written signature, establishes the identity of the sender filing the documents through internet which sender cannot revoke or deny. Digital Signature also ensures that no alterations are made to the data once the document has been digitally signed. A DSC is normally valid for 1 or 2 years, after which it can be renewed.
There are various providers of Digital Signature-
MTNL, Ncode, TCS,etc.
Step 3: Decide on the name of the LLP and check whether it is available
- The name with which LLP is to be incorporated is to be decided.
- Application shall be made in E-Form 1 for the availability of the proposed name with the Registrar of LLP
- The name of the limited liability partnership shall not be identical with Company or LLP already registered in India and it should not contains words prohibited under the ‘Emblems and Names (Prevention of improper use) Act, 1950’ or which are also not ‘Undesirable’ in the opinion of Central Government or which satisfies the conditions prescribed under rule 18(2).
- An applicable fee has to be paid for name approval.
Click here to search for availability of LLP name
Step 4: File the LLP Incorporation documents and obtain the Certificate of Incorporation.
- Incorporation documents must be filed with the Registrar in E-Form 2 with the following attachments.
1. Copy of authorization where the partner is a limited liability partnership, or company, or a limited liability partnership incorporated outside India or a company incorporated outside India.
2. Proof of address of registered office of limited liability partnership.
3. Details in respect of names of partners/witnesses and their signatures
4. Optional attachments as may be required.
- E-Forms contains details such as name of designated partners, SRN no. of E-Form 1, name of LLP, address of LLP, particulars of the state in which LLP is being incorporated.
After the Registrar is satisfied that all the formalities with respect to the incorporation has been complied, he will issue a Certificate of Incorporation in Form No. 16 as to formation of the LLP within maximum of 14 days from date of filing of documents. The Certificate of Incorporation issued shall be the conclusive evidence of formation of the LLP.
Step 5: Draft the LLP agreement and File it with Registrar of LLP
After the successful incorporation of Limited Liability Partnership, a LLP Agreement governing the mutual rights and duties among the partners and among the LLP and its partners is to be prepared and filed with Registrar of LLP within 30 days of Incorporation in E-Form 3.
The LLP Agreement must contains:
- Name of the LLP
- Name of Partners & Designated Partners
- Manner of contribution
- Profit/Loss Sharing ratio between partners
- Rights & Duties and obligations of Partners
- Proposed Business of LLP
- Rules for governing the conduct of operations of LLP
In case no agreement is entered into, the rights & duties as prescribed under Schedule I to the LLP Act shall be applicable.
- LLP agreement contains a subscription sheet which must be subscribed by the partners who shall sign the same along with their name. The subscription sheet must be witnessed by any chartered Accountant/Company Secretary/Advocate in practice.
- The LLP Agreement must be stamped in accordance with the stamp Act applicable in the relevant state where LLP is being incorporated.
Step 6: File the Consent of Partners with the Registrar of LLP.
After the successful incorporation of Limited Liability Partnership, a Letter of Consent from all of its partners is to be prepared in specified format and filed with Registrar of LLP within 30 days of Incorporation in E-Form 4.
(For Any specific LLP Incorporation related advice or assistance, you may contact Mr. Rahul Vats at vatsrahul.ca@gmail.com)
