HOW TO INCORPORATE LIMITED LIABILITY PARTNERSHIP?

What is a Limited Liability Partnership (LLP)?

A Limited Liability Partnership is a form of legally recognized partnership with limited liability which has a separate legal entity from that of its partners.

What are the Salient Features of LLP?

An LLP is considered a legal entity separate from its partners.
Partners of an LLP shall have a limited liability only to the extent of their committed contribution amount.
Key features of LLP is the eliminating Principal-Agent relationship between the partners which was the case in a traditional partnership. It means that a partner is not bound by the actions of another partner.
An LLP can hold its own brand name and identity.
An LLP shall have perpetual succession irrespective of the life period of its partners.
LLP offers significant operational flexibility due to lesser compliance burden in comparison to a private limited company.

Who Should Form an LLP?

LLP is considered ideal for those which are in their initial phase with limited capital and small market reach.
It is considered a good choice for those businesses that do not require any external funding.
It is also preferred form of organization for advisory businesses such as CA, CS, CWA, advocates, interior designers, etc.

How to Incorporate an LLP?

Step 1- Obtain Digital Signature Certificate- The first step in the process of LLP incorporation is to get the Digital Signature Certificate of the proposed designated partners.

Step 2- Apply for Reservation of name- An application for reservation of name in Form LLP RUN is filed with the Ministry of Corporate Affairs (MCA). Before making an application, it shall be made sure that the name is unique and does not resemble similar to any other Company/LLP. It is also important to note that the name shall not be similar to the trademark of any other existing Company/LLP. In case any existing trademark is used, a copy of the Board resolution authorizing such use shall also be attached to the application.

Step 3- Apply for Incorporation of LLP- Once the Name is approved by MCA, the form for incorporation of LLP is filed in Form FiLLip. This form is filed for incorporation and for allotment of Designated Partner Identification Number (DPIN) for maximum of 2 persons.

Step 4- Obtain Certificate of Incorporation- Once the incorporation of LLP is approved, MCA issues a Certificate of Incorporation (COI) evidencing proof of its incorporation.

Documentation Requirements:

Photo of Partners
ID Proof of Partners- PAN Card, Aadhar Card/Driving Licence, Voter ID, Passport.
Address Proof of Partners not older than months- Bank statement, electricity bill, telephone bill.
Address Proof of registered office- Rent agreement, NOC and utility bill not older than 2 months.

Conclusion: Since the introduction of LLP, it has been one of the most widely used form to carry out business. Due to its flexibility, lesser compliance and legal recognition, LLP is always preferred in comparison to a private limited company during the early stages of business.

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