Frequently asked questions.
Here’s what you need to know-answers to most of the Frequently Asked Questions from Entrepreneurs, Professionals or others looking about LLP.
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This segment consists of every basic detail one should know while incorporating a Limited Liability Partnership (LLP) firm.
A Limited Liability Partnership (LLP) is basically a partnership between 2 or more partners similar to a Private Limited Company. Each business partner is provisioned with limited responsibility which means they are not completely responsible for the whole business. The details about responsibility will be drafted in the LLP agreement.
The company's name will be in the form of 'Company's name services LLP Ltd'
LLP is a contract made between the members and the partners of a Limited Liability Partnership (LLP). It is there to establish a fair relationship between the partners and to protect their investments.
A partner in an LLP is a person who invests capital in the LLP. Whereas, the responsibility of legal compliances vests with the designated partners. LLP requires a minimum of 2 designated partners similar to the directors in the case of Companies. The designated partners take care of day-to-day operations, compliances, and dealing with the LLP.
To form an LLP in India, there must be at least two partners one of them being an Indian Resident and their Address and identity proof are the bare essential. Unique name for the LLP, a well described picture of business activity and future action plan are the vital requisite for forming an LLP.
LLPs are governed by the Ministry of Corporate Affairs by the LLP Act of 2008 whereas partnership firms are governed by the Indian Partnership Act of 1932. The main key difference is that a partnership firm has unlimited liability and no perpetual succession.
A limited Liability Partnership must have at least 2 designated partners and there is no minimum capital requirements. It has the advantages of both Private Limited Company and Partnership Firms. It facilitates Limited Liability with low compliance.
Limited Liability Partnership (LLP) is combination of partnership firm and company. It combines the benefit of both partnership and a limited liability company. It is essentially a partnership firm with Limited Liability.
PROs AND CONs:
To meet your objective, it is necessary to know the advantages and disadvantages. Here are some pros and cons of an LLP.
In India, registering a company can bring you numerous good interest. Registration of a company will:
Protects against personal obligation, and defends against other threats and losses.
Builds goodwill and also supports more customer attraction
Gives reliable investors bank credits and good investment with ease.
Provides cover of the responsibility to protect the company’s assets
Bigger commitment to wealth and greater stability
Increases the ability to develop and grow large
The disadvantages are as follows:
Public disclosure of financial accounts along with the income of the partners,
Profit cannot be retained in the same way as the company is limited by shares
LLP should have at least 2 members. So, if one partner decides to leave, it may result in the dissolution of the LLP.
A business cannot be commenced by mere investment alone. This segment deals with the requirements to form an LLP.
Minimum Two People: Two people are needed to register the LLP. However, there is no limit on maximum partners.
No Minimum Capital: Capital in the case of LLP is depending on the need of the business and contribution to the partnership by partners. The Stamp Duty on the deed is based on the amount of capital.
Resident Person requirement: One Designated partner of LLP must be from India. A person who has resided for a period of 182 days is considered to be an Indian Resident.
Unique Name: The name of the LLP should be unique, and it must not be the same or similar to the name of any existing company, LLP, or trademark which is registered or applied for.
The following are the documents required for incorporation of LLP:
ID proof, address proof, resident proof of the partners, photography, passport (in case of NRI), Proof of Registered office address and Digital Signature Certificate of one of the designated partner.
Formation of a business can be a lengthy process. Get answers on the whole process involved in incorporating an LLP.
Registering an LLP is a cake walk. It takes only 12-15 working days to register an LLP. The procedure is completely online and it is done with the Ministry of Corporate Affairs.
An LLP can be formed by a minimum of 2 designated partners. The compliances are relaxed as compared to a Private Limited Company. To form an LLP, you should acquire a Digital Signature Certificate (DSC) and Directors Identification Number (DIN). It is also required to obtain a Reserve Unique Name (RUN) from the Ministry of Corporate Affairs. Subsequently, you will have 20 days to file your application for incorporation. If you fail to obtain the same within the stipulated period, or else you will have to make another application by paying an additional fee.
Documents also should be filed online on the MCA website. On verification, the Registrar of Companies (RoC) will issue a certificate of incorporation and LLP can commence a business by opening a Bank Account.
The following is a step by step guideline for registering an LLP:
Apply for the name of LLP to be registered by filing FORM-1.
The same form can be filed for an application for reservation or change of name.
Details regarding the incorporation document and subscriber's statement must be specified in FORM-2.
Notification with regards to the status of the application will be sent to the given mail ID by the ministry.
Notification about approval will also be sent via mail.
Once LLP is incorporated, an initial LLP agreement must be filed within 30 days of incorporation.
LLP Agreement shall execute on Stamp Paper. (Amount of Stamp Paper 1% of Capital of LLP). LLP Agreement shall be file in e-form FORM-3.
It takes 15-20 working days to register an LLP i.e, 1-2 days for applying for Digital Signature Certificate, 3-5 days for checking and reserving the LLP's name, 6-10 days for drafting , filing, applying for certificate of LLP incorporation, 11-14 days for applying for PAN, TAN and drafting of LLP Agreement and 15-18 days for paying Stamp Duty, Filing LLP agreement and government processing time for LLP Agreement.