PROCESS FOR INCORPORATION OF LLP
INCORPORATION OF LLP UNDER COMPANIES ACT, 2013
Recently most entrepreneurs have started opting for Limited Liability Partnership, considering it has most positive features of Partnership and Companies. It is hybrid form which incorporates benefits of both partnership and companies.
Limited Liability Partnerships (LLPs) are commercial vehicles which combine the features of partnership and company form of business .The concept of Limited Liability Partnership (LLP) has been introduced in India by way of Limited Liability Partnership Act, 2008 (notified on 31st March 2008).
• A Limited Liability Partnership combines the advantages of both the Company and Partnership into a single form of organization.
• In an LLP one partner is not responsible or liable for another partner's misconduct or negligence.
• In an LLP, all partners have limited liability for each individual's protection within the partnership, similar to that of the shareholders of a limited company.
• However, unlike the company shareholders, the partners have the right to manage the business directly. An LLP also limits the personal liability of a partner for the errors, omissions, incompetence, or negligence of the LLP's employees or other agents.
REQUIREMENTS FOR INCORPORATION OF LLP:
PARTNER:
i. A minimum of two partners will be required for formation of an LLP. There will not be any limit to the maximum number of partners.
ii. A body corporate can also be Partner of LLP.
DESIGNATED PARTNER:
i. Every LLP shall be required to have at least TWO DESIGNATED PARTNERS.
ii. Designated Partners shall be individuals
iii. At least one of the Designated Partner shall be a resident of India.
iv. In case of a LLP in which all the partners are bodies corporate or in which one or more partners are individuals and bodies corporate, {At least two individuals who are partners of such LLP or nominees of such bodies corporate shall act as designated partners}.
REGISTERED OFFICE:
i. Every LLP shall have a registered office to which all Communications and Notices may be addressed and where they shall be received. (Section- 13)
Process for Incorporation of LLP.
Below Given are Seven Simple Process for Incorporation of LLP.
STEP WISE PROCESS FOR INCORPORATION OF LIMITED LIABILITY PARTNERSHIP “LLP”
STEP-I- OBTAIN DIN:
Every individual intending to be appointed as designated partner of a limited liability partnership has to make an application for allotment of Director Identification Number. MCA has vide its notification amended the limited liability partnership rules, 2009. Now instead of DPIN, every partner who will be appointed as designated Partner, will need to apply for DIN and not DPIN.
STEP-II- OBTAIN DSC
Designated partner of LLP/proposed LLP, whose signatures are to be affixed on the e-forms has to obtain class 2 Digital Signature Certificate (DSC) from any authorized certifying agency. Register Digital Signature of Designated Partner on the website of Ministry of Corporate Affairs. Fill in the registration form. Fields marked * in the form are to be mandatorily filled. Upload digital signature certificate. On successful registration, system will give a message that you have been registered successfully.
STEP-III- SEARCH FOR NAME AVAILABILITY
Selection of business name is crucial for the image of your venture. You select a name which reflects the business you plan. Ensure selected name satisfy LLP Name Guidelines of Ministry of Corporate Affairs.
Free name search facility (of existing companies / LLPs) is available on MCA portal. The system will provide the list of similar/closely resembling names of existing companies/LLPs based on the search criteria filled up . Link given below:
http://www.mca.gov.in/DCAPortalWeb/dca/MyMCALogin.do?method=setDefaultProperty&mode=16
STEP-IV- FILLING OF FORM LLP-1 (NAME APPROVAL)- SECTION-16
After Search of Name approval, If name is available according to your search. Then Download Form LLP-1 from the below given Link:
http://www.mca.gov.in/MinistryV2/Download_eForm_LLP.html
Following Information are required to be filed in form LLP-1
a. DIN of Designated Partner.
b. Email Id
c. Occupation
d. State of Register office of Company
e. Objects of LLP
f. Partners Contribution into LLP
g. Name of LLP
h. Significant of Name
i. If Proposed Name is Based on Trade Mark (NOC from the Owner of TM)
j. DSC of Designated Partner
NOTE:
a. **In case the displayed residential status needs to be updated or the residential Status is not displayed; you are required to file Form DIN-4 on MCA21 portal for updating the residential status of the DP before filing this Form.
b. Ensure that correct details have been provided as the same shall be automatically pre-filled in Form 2 for incorporation of LLP. Append digital signatures and submit the e-form. Pay the necessary fee of Rs 200/- by credit card (master/visa).
c. Upon receipt of an application under Section 16(1) and on payment of the prescribed Fees of Rs. 200/-, the Registrar may, if he is satisfied, subject t to the rules prescribed by the Central Government in the matter, that the name to be reserved is not one which may b e rejected on any ground referred to in subsection (2) of Section 15, reserve the name for a period of three month from the date of intimation by the Registrar.
STEP-V- DRAFTING OF LLP AGREEMENT SECTION- 23(3)
Section 23(3) of the LLP Act provides that an agreement in writing made before the incorporation of a LLP Between the persons who have subscribed their names to the incorporation document.
This is common, and also advisable, to have an agreement between the persons who have subscribed their names to the incorporation documents of a LLP. Such agreements usually relate to preliminary and pre-incorporation expenses of a LLP and their subsequent ratification by the LLP, after incorporation. The provision of Section- 23(3) suggests that such an agreement(s) may impose obligations on the LLP only when such an agreement(s) is ratified by all the partners after the incorporation of the LLP.
The LLP agreement is very lengthy document and should be on Stamp paper. The LLP Agreement must be Stamped in accordance with the stamp Act applicable in the relevant state where LLP is being incorporated.
Its include information as given below:
Effective Date of LLP Agreement, Registered Office of LLP, Business of LLP, Contribution of Partners, Profit Sharing Ratio, Provisions for Admission, Resignation, Retirement and cessation of partners, Removal of Partners, Rights of Partners, Duties of Partners, Duties & Responsibilities of Designated Partner, Meetings, Liability of LLP, Winding up & Dissolution, Accounting Year, Audit, Jurisdiction, Validity of this Agreement etc.
STEP-VI FILING OF (FORM 2) FOR INCORPORATION AND SUBSCRIPTION DOCUMENT
After receiving of Name approval Letter from ROC within 90 days there is need to prepare and get sign all the documents required to be attached in Form-2 and file Form- 2 with ROC.
INFORMATION REQUIRED TO BE MENTION IN FORM LLP-2
a. Enter the proposed address of the registered office and valid email ID of the LLP.
b. Enter the main division of industrial activity- “given below in Annexure A”
c. Enter the No. of Designated Partner.
d. Enter the total monetary value of contribution by all the partners/ designated partners of the LLP. Value of contribution cannot be less than the contribution entered at the time of name availability.
DOCUMENTS REQUIRED TO BE ATTACH IN FORM LLP-2
a. Proof of address of registered office of LLP
b. Subscribers' sheet including consent
c. Detail of LLP(s) and/ or company(s) in which partner/ designated partner is a director/ partner (if applicable).
NOTE:
a. After the Registrar is satisfied that all the formalities with respect to the incorporation has been complied , he will issue a Certificate of Incorporation as to formation of the LLP within maximum of 14 days from date of filing of documents .
b. The Certificate of Incorporation issued shall be the conclusive evidence of formation of the LLP.
c. On incorporation Every LLP so registered shall be assigned a LLP identification number (LLPIN) in one consecutive series.
STEP-VII- FILLING OF LLP AGREEMENT (FORM- 3)
It is not mandatory to file LLP agreement at the time of registration and same can be file in form LLP-3 within 30 days of Incorporation of LLP. Designated partners are responsible for doing all acts, matters and things that are required to be done for complying with the provisions of the LLP act. They are liable to all penalties imposed on the LLP. So it is very important to draft LLP agreement with professional help. The LLP agreement has to be uploaded. Once it gets approved all the formalities for registration gets completed. The LLP can start It’s business now onwards.
NOTES:
VALUE OF STAMP DUTY ON LLP AGREEMENT
1. IN MAHARASHTRA
A. Contribution in cash
a) where share of contribution does not exceed Rs.50,000- Rs. 500
b) where it exceeds Rs. 50,000 for every Rs. 50,000 or part subject to a maximum of Rs. 5,000- Rs. 500
B. Contribution by way of property
Same duty as on conveyance under A.25 on the market value of property
1. IN DELHI
A 1 % of Contribution Subject To Max 5000/-
CONCLUSION:
Above gives is complete process of Incorporation of LLP. LLP is more advantageous form of organization over a company from Compliances, tax and operational flexibility stand point. Therefore LLP may be more suitable for small entrepreneur and professionals particularly.
(Author – CS Divesh Goyal, GOYAL DIVESH & ASSOCIATES Company Secretary in Practice from Delhi and can be contacted at csdiveshgoyal@gmail.com)
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