An Overview of Limited Liability Partnership Registration
LLP stands for Limited Liability Partnership. It is a hybrid corporate business that allows its members to avail the benefits of a company as well as a partnership firm. It provides the advantage of limited liability like a company and the liberty to decide the internal management matters of the company based on a mutual agreement like a partnership firm. This enables the company members to divide the risk and leverage the expertise and skill of the individual and division of labour.
A Limited Liability Partnership (LLP) is governed by the Limited Liability Partnership Act 2008; the Bill was presented on 12 December 2008 and was enforced on 31st March 2008. The act governs the formation and regulation of a Limited Liability Partnership.
The Act was amended in the year 2021. The amendment brought significant changes for the better regulation of LLP in India
Benefits of Limited Liability Partnership Registration
The key benefits of a LLP Registration are listed below:
- Separate Legal Entity: An LLP enjoys an independent legal status, just like companies. The LLP holds different status from its partners. Such entities have the right to sue the third party in case of legal dispute and vice versa. The contracts are signed in the LLP's name, which provides a sense of confidence to various stakeholders and end-users.
- Limited Liability of The Partners: The partners of an LLP have limited liability. This means that each partner's liability is limited to the agreed contribution to the company. This indicates that they are liable to pay only the quantum of contributions made by them and they are not personally obligated to address any loss in the business. If an LLP ends up insolvent during winding up, only the LLP assets are liable for compensating its debts. The partners possess no personal liabilities, and therefore they can operate as credible businessmen.
- Better Flexibility: The operations of an LLP are determined by the LLP agreement, which is based on the mutual decision of the company's members. This makes the company's functioning quite flexible compared to other forms of company.
- Low Incorporation Cost and Minimal Compliance: The cost of Incorporating an LLP is relatively low compared to other business structures such as a private and public limited company. Also, the quantum of compliances is on the low for these entities. The LLP is mandated to file only two statements a year, i.e. Statement of Accounts and Solvency and an Account return.
- No Need for Minimum Capital Contribution: The LLP can be incorporated in the absence of any minimum capital. Also, there is no requirement to procure any amount of capital contributed by the concerned partners.
- Perpetual Existence: This form of company has a perpetual Existence which is not affected by the death of any partner.
Checklist for LLP Registration
List of Essential Documents for the Formation of LLP
The documents required for the registration of LLP are given below:
Procedure for Registering LLP in India
- Obtain DSC, DIN & Name Approval
The first step is to apply for Digital Signature Certificate (DSC) for all the directors, along with Digital Identification Number (DIN) & Name Approval. DSC can be easily obtained from the nearest Certifying Authorities or CAs with self-attested copies of their identity proof. DIN is applied in the SPICe Form along with the details of the Director. The DIN can be used as DPIN as well; the Name Approval can be obtained through filing the RUN LLP Form.
- File the FiLLiP Form for the incorporation of LLP.
The next step is filing the FiLLiP form with MCA along with the essential documents.
- Obtain the Incorporation Certificate
After filing the application along with the necessary documents, the Registrar of Companies (ROC) shall inspect and verify the application and issue the Certificate of Incorporation; after the verification
- Draft LLP Agreement
After the incorporation process, an initial LLP agreement must be filed within 30 days from the incorporation date. The user must file the detail in Form 3 (information about LLP agreement and change, if any, made therein.
LLP Amendment Act 2021
The LLP Amendment Act was notified on 11 February 2022. This is the first-ever Amendment after the Act came into force i.e. 2009.
The significant amendments in this Act is enlisted below
- Decriminalisation of Monetary Offenses
The technical, minor and compliance-related offenses are moved to In – House Adjudication Mechanism framework along with modified penal provisions. This new amendment Act has also reduced the monetary penalty for some offences.
- Power to Regional Officers to Compound Offense
The Regional officer which is appointed by the Central Government has the power to compound any offence under the amended legislation. The offence is punishable with a fine. However, the amended act also prescribes the process of compounding such offences. The fine will be charged on the basis of the limit prescribed by the Act, but the same limit shall not apply if the offender has committed the same offence within three years from the date of committing the first offence.
- Fees and Penalties for Start-up and Small LLP
The new amendment states that the penalty for non-compliance with the provisions of the LLP Act shall attract a penalty of half the amount as specified in the Act, which would be no more than Rs. 1 Lac for LLP and 50 000 for each designated partner or any other person as per the case . This is added by introducing a new section, i.e. Section 76 A
- Establishment of Special Courts
According to this amendment, special courts shall be established to exclusively try the cases related to the offences committed under the Principal Act. This would help in faster disposal of cases as well as a reduction in the burden of the normal courts.
- Other Key amendments
- Another section has been added to the new Act, i.e. Section 68 gives the power to the Central Government to establish registration offices at places deemed fit by the Central government.
- The residency requirement has been reduced from 180 days to 120 days during a FY under Section 7 of the apex act. It further prescribes that the LLP should have at least 1 Designated partner who is a resident of India
- The amended legislation also recognized the concept of Start-up LLP and provided the power to the Central government to recognize certain LLP as start-up LLP by issuing notification from time
- Section 34 A has been added to the Principal Act, which gives the power to the central government to prescribe auditing and accounting standards for various categories of LLP after consulting with the National Financial Reporting Authority and the Institute of Chartered Accountants of India.
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