Key things to know when registering a LLP

Registering a LLP requires an Application for Digital signature Certificate, Designated Partner Identification Number, Reservation of name of the LLP and finally Registration of LLP.

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In case no agreement has been executed, the relationship between the partners and the partners and the LLP will be governed by the First Schedule of the Act.
By Tanvi Loond

A Limited Liability Partnership (LLP) is a hybrid business structure that combines the best aspects of a Partnership and a Company.

The LLP Bill, 2006 was introduced in the Rajya Sabha on December 15, 2006 to combine the tax status of a partnership structure with the advantage of limited liability for its partners.


Some of the features of an LLP are:
Separate Entity
An LLP is a separate legal entity, that is, it can own properties in its name, it can sue and be sued in its name and its continuity does not depend on its partners, who may change from time to time
Limited Liability
Partners are liable to the extent of their contribution to the firm. Unlike a partnership firm, partners in an LLP are not liable to the outside creditors.
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Ease of running the business
The formation and running of an LLP requires lesser compliances when compared to the formation and running of a Company
Membership
The following can be partners in an LLP:
  • Individuals
  • Limited Liability Partnerships
  • Foreign Limited Liability Partnerships
  • Companies
  • Foreign Companies
Incorporation of an LLP
Limited Liability Partnership Act 2008 (the Act) is the governing Act for incorporation of an LLP. The Act mandates a minimum of two partners to create an LLP but there is no limit regarding the maximum number of partners. In this article, we throw light on the steps to be followed while incorporating an LLP.

Step 1: Application for Digital signature Certificate and Designated Partner Identification Number
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Every individual who is intending to be appointed as designated partner of an LLP shall make an application for a Digital Signature Certificate (DSC). A DSC is mandatory to digitally sign all forms to be filed electronically on the MCA portal. A DSC can only be obtained from government recognized Certifying Agencies.

Once the DSC is obtained, the partners shall make an application in Form DIR-3 for obtaining Designated Partner Identification Number (DPIN). This is mandatory in order to be appointed as designated partner under the Act. While filing Form DIR-3 the applicant must attach a proof of identity along with a proof of residence.

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Step 2: Reservation of name of the LLP
An applicant must get a name reserved for any new LLP to be incorporated or for any conversion of a firm / company into LLP. An application for reserving the proposed name shall be made through the MCA portal. This application is made by filing Form Reserve Unique Name-LLP (RUN-LLP). Once the name reservation request has been submitted, it will be checked and, if found feasible, approved by the Central Registration Centre (CRC). The applicant will receive an email from the CRC advising the outcome of the name reservation request.

Once a name is approved, the applicant can apply for incorporation of the LLP, before expiry of the validity of approved name, that is, three months from the date of approval. Form RUN-LLP has to be filed with a fee of Rs 200.

Step 3: Registration of LLP
Once the name has been reserved, the applicant has to file an LLP Integrated Incorporation form (FiLLiP) through the MCA portal. This form requires details such as particulars of the proposed or approved name of the LLP, business activity to be carried out by the LLP, proof of address of registered office of the LLP, subscriber's sheet including consent, details of the designated partners along with the DPIN, Total monetary value of contribution by partners in the LLP etc.

Form FiLLiP has to be filed with the following fee along with the applicable Stamp Duty

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Step 4: Certificate of Incorporation
Upon successful registration of the LLP, the RoC shall issue a Certificate of Incorporation in Form 16 under the seal of the Registrar. This certificate contains the LLP Identification Number (LLPIN)

Step 5: Limited Liability Partnership Agreement
LLP Agreement is the document that defines the relationship between the partners and their rights and duties vis-à-vis the LLP. The partners can enter into this agreement upon registration of the LLP. An LLP agreement lays down terms and conditions for admission and removal of partners, consequences of death of a partner, sharing of profit and loss, dispute resolution, partners' duties and responsibilities, among others. If the agreement has been executed before incorporation, the partners have to ratify the agreement after registration and have to file Form 3 with the RoC within 30 days of incorporation.

Form 3 has to be filed with the following fee along with the applicable Stamp Duty

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In case no agreement has been executed, the relationship between the partners and the partners and the LLP will be governed by the First Schedule of the Act.

(Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.)
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