Reason for Limited Liability Partnership (LLP) registration - PowerPoint PPT Presentation

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Reason for Limited Liability Partnership (LLP) registration

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Title: Reason for Limited Liability Partnership (LLP) registration


1
Reason for Limited Liability Partnership (LLP)
registration
  • Here in this blog, we have discussed about the
    reason for Limited Liability Partnership and the
    steps involved in LLP registration.

2
  • By the way, LLP stands for Limited Liability
    Partnership. An LLP is described as a hybrid form
    of business because it offers more flexibility
    that is normally there in case of a partnership,
    as well as the benefits of limited liability
    associated with the limited liability firm. An
    LLP is basically an independent legal entity.

3
  • A LLP combines the advantages of both the
    Company and Partnership in a single form of
    organization. The major difference between for
    that of other traditional partners is that a
    partner in LLP is not responsible for misconduct
    of another partner. All partners will enjoy
    the limited liability for the protection of each
    individual, which is similar to that of the
    shareholders of a corporation. Reason for LLP
    Registration is discussed below

4
Reason for LLP Registration
  • In India, LLP was governed under the Limited
    Liability Partnership Act, 2008. In LLP the
    partners have the right to manage the business
    directly or indirectly, unlike corporate
    shareholders.
  • Moreover, an LLP can continue doing business in
    spite of changes of partners. It can hold
    property and also enter contracts on its own. As
    such it is held liable to the fullest extent of
    its assets. However, the liability of the
    partners is restricted to the contribution that
    they have made in the same.

5
LLP Agreement
  • Since, an LLP is bestowed with the status of a
    body corporate as well as a separate legal entity
    it has perpetual succession. All the individual
    partners happen to be safeguarded from any joint
    liability that may be created by the wrong
    business decisions taken by the other partner.
    The same reason can also be applied to any
    misconduct on part of partners. It is the
    main partnership agreement that governs the
    mutual duties and rights of the partners .
  • At times, such agreements may also be reached
    between an LLP and the partners. In that case
    that particular agreement would be accorded the
    status of main governing entity. However, since
    it is an independent legal entity, an LLP cannot
    be considered to have been absolved of the
    liability towards its various obligations

6
Requirement for LLP incorporation
  • In a limited liability partnership, there is no
    share capital like corporate but there has to be
    some contribution from each partner which is
    known as partners capital for the LLP formation.
    However there is no minimum requirement of
    capital for LLP registration. 
  • In essence, a person can start a limited
    liability partnership with any amount of capital.
    There is no reason to show the proof of capital
    investment during the incorporation process.
    Partners contribution can be tangible, movable
    or immovable or intangible property and any other
    LLP benefits. The reason behind LLP formation is
    limited liability.

7
NATURE OF LIMITED LIABILITY PARTNERSHIP
  • LLP is generally formed to carry on a lawful
    business, which includes any trade, business or
    profession.
  • Moreover, LLP is a body corporate having a legal
    separate entity from its partners, also having a
    perpetual succession. Changes in the partners
    shall not affect the rights, liabilities, and
    existence of the LLP.
  • LLP can acquire, hold, develop or dispose of a
    property.
  • LLP can sue, can be sued and can possess a common
    seal and do such acts as body corporate are
    lawfully allowed to do.
  • Any liabilities associated to LLP is met out of
    the property of the LLP.

8
ADVANTAGES OF A LIMITED LIABILITY PARTNERSHIP
  • The cost of LLP formation is low
  • Easy management
  • There is no need for the capital contribution
  • No restrictions for the number of partners
  • Less agreement requirement
  • Less Government intervention
  • In LLP, auditory requirement will be there in the
    case of contributions exceeding Rs. 25 lakh or
    turnover exceeding Rs. 40 lakh
  • Easy to dissolve or wind-up the firm.

9
Steps involved in LLP Application process
  • STEP 1 OBTAIN DIGITAL SIGNATURE CERTIFICATE
    (DSC) FOR PROPOSED DESIGNATED PARTNER
  • The first step is to acquire the DSC (Digital
    Signature Certificate) for Designated Partner of
    LLP or the proposed LLP, their signature and
    photo is to be affixed on the e-form along with
    attested Identity and address proof documents to
    obtain Class 2 or Class 3 DSC from any authorised
    certifying authority.

10
  • STEP 2 OBTAIN DESIGNATED PARTNERS IDENTIFICATION
    NUMBER (DPIN)
  • In second step, you have to apply for DPIN/ DIN
    (Designated Partner Identification Number/
    Director Identification Number) for all
    designated partners. And for this, you have to
    apply for DIN through e-Form DIR-3 in MCA portal.
  • STEP 3 OBTAIN NAME APPROVAL FROM MCA
  • In third step, before incorporation or
    registration of a limited liability
    partnership (LLP) company, the applicant/
    entrepreneur has to reserve the proposed name of
    LLP in MCA database and he needs to file the
    E-Form 1 for ascertaining the availability and
    reservation of unique name of the LLP business.

11
  • STEP 4 INCORPORATE THE LLP COMPANY BY FILING
    CERTAIN FORM
  • In fourth step, once the name is reserved by the
    ROC, then you can incorporate the LLP Company by
    filing E-Form 2 along with necessary documents,
    which is typically used for incorporating a new
    limited liability partnership.
  • E-Form 2 contains all details of LLP proposed to
    be incorporated, partners or designated partners
    details and also the consent of the partners or
    designated partners to act as partner or
    designated partner.

12
  • Step 5 Filing of LLP Agreement and Partners
    Details
  • In fifth step, the applicant has to file LLP
    Agreement with the Registrar in E-form 3 within
    30 days of incorporation of LLP. And the
    execution of LLP Agreement is mandatory as per
    Section 23 of LLP Act, 2008.
  • There are certain documents that have to be
    provided by both the LLP as well as the partners
    in order for the company to be registered. An LLP
    needs to furnish proof of its registered office
    address and its DSC. The partners have to provide
    their PAN cards or any other reason for ID proof,
    their address proof, their residence proof, and
    photographs.

13
  • After submission of complete documents at ROC
    then the registrar will inspect and verify it, if
    they satisfied with your relevant compliance
    provisions of LLP Act, then will register the
    LLP. And you will be issue an incorporation
    certificate in Form 16 within 14 days of filing
    e-Form 2.

14
  • In case the partners are foreign nationals or
    non-resident Indians they have to provide their
    passports. It is very important that these
    passports are either apostilled or notarized by
    relevant authorities in the relevant home country
    of that partner.

15
CONVERSION OF EXISTING FIRMS INTO LLP
  • Consequently, a firm can apply to the Registrar
    of Companies in the form prescribed along with
    the prescribed documents for converting itself
    into an LLP. It is important to note that all the
    partners of the firm become partners of the LLP.
  • Assets and liabilities of the firm can be
    transferred on LLP registration, to and vest in
    the LLP and the firm will stand dissolved.

16
  • However, it is important to note that every
    official correspondence of the LLP should bear a
    statement ,not later than fourteen days after the
    registration that it was converted from a firm
    into an LLP, along with the date of registration.
    This activity shall be carried on for a period of
    twelve months commencing not later than fourteen
    days after the date of LLP registration
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