LLP is a new corporate structure that combines the flexibility of a partnership and the advantages of limited liability of a company at a low compliance cost. In other words, it is an alternative corporate business vehicle that provides the benefits of limited liability of a company, but allows its members the flexibility of organising their internal management on the basis of a mutually arrived agreement, as is the case in a partnership firm.
Owing to flexibility in its structure and operation, it would be useful for small and medium enterprises, in general, and for the enterprises in services sector, in particular. Internationally, LLPs are the preferred vehicle of business, particularly for service industry or for activities involving professionals.
LLP is governed by the provisions of the Limited Liability Partnership Act 2008, the salient features of which are as follows: -
The Indian Partnership Act, 1932 shall not be applicable to Limited Liability Partnerships.
Advantages of a Limited Liability Partnership:-
1. As Many Owners As Needed:-One of the greatest things of a limited liability partnership is that there is no limit on the amount of owners that can be involved with the business. This is great because it evenly spreads out the amount of liability that each partner can have if something where to go wrong with the business.
2. Much Less Liability:-Just as the name suggests, limited liability partnerships limit your liability. Since there are multiple owners involved in the business all of the risks of the business are spread out and made much smaller than if a single person was responsible for the business on their own. This generally refers to legal issues, like if the company was sued for any reason.
3. Tax Benefits:-Another one of the great benefits of operating underneath an LLP is how you file taxes. The partnership itself doesn’t have to file taxes as a business, which provides great breaks for the company. However, each individual partner must file a variety of different tax forms regarding the business.
4. Great Flexibility:-Flexibility is a defining characteristic of limited liability partnerships. Each partner in the business has the ability to decide how much they want to contribute and how much of a partner they truly want to be in the business. They are also not obligated to participate in business meetings or consultations with anyone that they do not feel the need to.
DISADVANTAGES OF A LIMITED LIABILITY PARTNERSHIP:-
1. Not All States Are On Board:-Due to the tax benefits and tricky workings of an LLP, some states do no allow them to form or operate in their region. Another big problem is that many states do not recognize LLP’s as a legal business.
2. Additional Taxes:-Just like some states do not recognize, the majority of the rest pose large tax limits on limited liability partnerships. These taxes can come in as additional taxes when registering as well as issues with personal tax filing.
3. Less Business Credibility:-Another huge problem with limited liability partnerships is the fact that other business and many consumers or clients do not see them as a credible business. Corporations gain much more respect and are generally more successful than LLPs.
Major Steps involved for incorporation of LLP:-
Know About Digital Signature
What is a Digital Signature Certificate (DSC)?
The Information Technology Act, 2000 provides for use of Digital Signatures on the documents submitted in electronic form in order to ensure the security and authenticity of the documents filed electronically. This is the only secure and authentic way that a document can be submitted electronically. As such, all filings done by the companies under MCA21 e-Governance program are required to be filed with the use of Digital Signatures by the person authorized to sign the documents.
Class of DSC
The Ministry of Corporate Affairs has stipulated a Class-II or above category signing certificate for e-filings under MCA21. A person who already has the specified DSC for any other application can use the same for filings under MCA21 and is not required to obtain a fresh DSC.
Required documents for getting DSC:-
The concept of a Designated Partner Identification Number (DPIN) has been introduced In Limited Liability Act (2008). As such, all the existing and intending designated partners have to obtain DPIN within the prescribed time-frame as notified.
DPIN is a unique identification number allotted to an individual who is an existing partner of the LLP or intends to be appointed as partner of an LLP. DPIN is an 8 digit number. For example: 02384673.This is allotted by Central Government (office of regional director), Ministry of Corporate Affairs.
Required documents/information’s for Allotment of DPIN:-
*Signature should be same as in PAN card.
Before you fill-in applications for DPIN please remember following common causes of REJECTIONS:-
Name Search and application for Name Availability:-
Next step in the formation of a LLP is the approval of the name by the Registrar of Companies (ROC) in the State/Union Territory in which the LLP will maintain its Registered Office. This approval is provided subject to certain conditions: for instance,
Once LLP name is approved, it is valid for a period of sixty days from the date of application, within that time LLP Agreement together with miscellaneous documents should be filed. If one is unable to do so, an application may be made for renewal of name by paying additional fees.
Information required for seeking Name Approval:-
I. Form 2:-
The following information/documents required in Form 2:-
Get the subscription sheet by all the designated partners in their own handwriting with the following details as per the given order:-
The subscription sheets of LLP must mention the number of monetary value of the authorized capital shared by the promoters.
A) Consent by the designated partners.
B) Affidavit for non-acceptance of public deposit by all the partners.
C) Address proof for the registered address of LLP.
D) If property is owned by the proposed partners, then:-
Registered proof in the name of the partner like latest Electricity Bill, Telephone/ Mobile bill, Gas bill, Water Bill.
NOC from the proposed partner to use the premises.
If the property is owned by other than proposed partners, then;
Rent agreement between the land lord and proposed LLP through its proposed partners.
Registered address proof in the name of the landlord like latest Electricity Bill, Telephone/ Mobile bill, Gas bill, Water Bill.
NOC from the landlord to use the premises.
II. After this, incorporation certificate having CIN (corporate identification number) like AAD-1919 will be obtained.
III. After getting Certificate of Incorporation, Form 3 is uploaded with notarized LLP Agreement in specified format to get approval from ROC.
IV. The certificate of incorporation will be required while opening the current bank account in LLP name.
Documents/Information Required During Process:-
Following documents/ forms need to be submitted along with requisite fee which is based on the amount of authorized capital as under:
Availability of Name for a New Company.
Application or declaration for incorporation of a LLP along with subscriber’s sheet , consent of partners and affidavit for non-acceptance of public deposit.
Approval of LLP Agreement.
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