LIMITED LIABILITY PARTNERSHIP (LLP)

• A limited liability partnership (LLP) is a partnership in which some or all partners have limited responsibility. Hence, it can display the characteristics of both partnerships and corporations. In an LLP, no partner is responsible or liable for the misbehaviour or negligence of another. This separates a limited liability partnership (LLP) from a traditional partnership, in which each partner has a joint liability. In a limited liability partnership (LLP), some or all partners have limited responsibility similar to that of corporate stockholders. Partners, unlike corporate stockholders, have direct management authority over the business.
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• In India, as in many other countries, a Limited Liability Partnership (LLP) and a Limited Partnership are distinct entities. A limited liability partnership (LLP) functions similarly to a limited partnership, with the exception that each member's personal liability is restricted to the amount of their capital contribution to the LLP.
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• Section 2 of the Limited Liability Partnership Act states, “A limited liability partnership is a body corporate formed and incorporated under this Act and is a legal entity separate from that of its partners”.

Advantages of an LLP:

1. Limited liability
2. Ease of formation
3. Perpetual succession
4. Separate legal entity
5. No limit on the number of partners
6. Easy to transfer

Disadvantages of the LLP:

1. Lack of secrecy
   
2. Not able to raise from the public
   
3. Higher tax rate
   

Is registration mandatory?

Yes, it is mandatory to register the LLP under the LLP Act and an application has to be made to the Ministry of Corporate Affairs.

Whether an LLP can be registered for a Non-Profit business?

No. one of the essential requirements of an LLP is “carrying on a lawful business with profit motive”. Therefore an LLP cannot be incorporated as a non-profit business.

The procedure for registering an LLP:​

1. Every person who wants to be nominated as a designated partner needs to obtain the Designated Partner Identification Number (DPIN) by filing Form DIR-3 with the MCA portal.
2. The designated partners must obtain Digital Signature Certificate(DSC) and the same has to be registered on the portal.
3. Then draft the LLP objects and prepare the LLP incorporation documents.
4. Upload them with the Ministry of Corporate Affairs portal.
5. Pay the incorporation challan amount through the MCA portal
6. The registrar of LLPs will go through your application and scrutiny all the documents and issue you the Certificate of Incorporation online through your registered E-mail address.

What are the minimum and maximum number of partners in an LLP?

At least 2 partners are needed and there is no maximum limit of partners in an LLP.

What to do if LLP exceeds 200 members?

Form 2A (addendum) needs to be filed if the number of partners exceeds 200.

Can a minor be a partner in LLP?

No, a minor cannot become a partner in LLP. But, with the consent of all the partner minor can be admitted to the benefits of LLP.

What about the annual compliances that are to be followed by an LLP?

The Annual return (Form - 11) is to be filed within 60 days of the closure of the financial year.

Statement of Accounts and Solvency (Forn-8) shall be filed within 30 days from the end of six months of the financial year to which it relates.

Every firm has to maintain a uniform financial year ending on 31st march of a year.

What are the consequences if there is a delay in filing or non-filing?

It leads to penalties on the LLP and the designated partner. Further, the MCA will initiate legal proceedings such as striking off the entity from the registry.

Who is required to do signing/filing of Annual forms like Form 8 & Form 11 in LLP?

Form 8 & Form 11 are to be digitally signed by a minimum of TWO Designated partners.