Prepared By :
A.RAMA GOPAL KRISHNA
CA-FINAL
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The Limited Liability Partnership was formed in the early 1990
s in United States in the consequence of the collapse of real
estate and energy prices in Texas in the 1980s. This collapse
led to a large wave of bank and savings and loan failures.
Because the amounts recoverable from the banks were small,
efforts were made to recover assets from the lawyers and
accountants who had advised the banks in the early 1980s.
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The reason was that partners in law and accounting firms were
subject to the possibility of huge claims which would bankrupt
them personally, and the first LLP laws were passed to shield
innocent members of these partnerships from liability.
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Apart from India Many Countries like Canada, China Germany,
Greece, Japan, Kazakhstan , Poland, Romania, and Singapore
have felt the need to recognize LLPs in their country.
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In India, The Limited Liability Partnership Act, 2008 was
published in the official Gazette of India on January 9, 2009
and has been notified with effect from 31 March 2009.
The first LLP was incorporated in the first week of April
2009.
 Some sections relating to conversion of existing partnership
firms and private as well as public unlisted companies into
LLP have been brought into force on 31-5-2009.
 The legal consultants “Handoo and Handoo” have become
the first Limited Liability Partnership firm of India.
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LLP is a separate legal entity separate from its
partners, can own assets in its name, sue and be
sued.
Unlike corporate shareholders, the partners have
the right to manage the business directly.
In an LLP, One partner is not responsible or Liable
for partner’s misconduct or negligence.
Minimum of 2 partners and no maximum.
Should be ‘for profit’ business.
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The rights and duties of partners in LLP, will
be governed by the agreement between
partners and the partners have the flexibility
to devise the agreement as per their choice.
The duties and obligations of Designated
Partners shall be as provided in the law.
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Liability of the partners is limited to the
extent of his contribution in the LLP. No
exposure of personal assets of the partner,
except in cases of fraud.
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LLP shall maintain annual accounts.
However, audit of the accounts is required
only if the contribution exceeds Rs. 25
lakhs or annual turnover exceeds Rs.40
lakhs.
Perpetual succession.
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Partner in LLP is not liable for the wrongful
acts of other partners.
LLP will have a perpetual succession.
Admission or Cessation of a Partner shall
not affect its status.
A Firm, Private Company or a Public
Company can be converted in LLP.
Partner may transact with LLP.
Professionals like CA, CS etc. can form LLP.
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No limitation on maximum number of
Partners in LLP.
Even a body corporate can be a Partner.
Audit not mandatory for certain LLPs.
Rights of Partners can be transferred,
either wholly or in part.
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Business with profit motive for LLP
(Nothing like Section 25 Company).
Unlimited liability of partners and LLP in
case of Fraud.
Mandatory filing with ROC.
LLP can not maintain financial secrecy.
FDI issue yet not notified.
Accounting Standard yet not notified
Though LLP is a combination of both Partnership and Company, it differs
from them in certain aspects as discussed below:
Sl. No Condition
LLP
Company
Partnership
1
Registration
To be registered
With Registrar of
LLP under LLP Act
To be registered with under
companies Act, 1956
Registration is optional
2
Name
Name should contain ‘’ Limited
Liability Partnership” or “LLP”
as last word.
Name should contain ‘Limited’
or ‘Private Limited’ as last
word.
Any name as per
choice.
3
Legal Entity
LLP is a separate
legal entity
registered under
LLP Act
Company is a
separate legal
entity registered
under Companies
Act, 1956
Not a separate
legal entity
Sl.
No
Condition
LLP
Company
Partnership
4
Formation Cost
The cost of
Formation is lesser
that of formation
of Company.
The cost of`
Formation is higher
than that of
formation of LLP
The Cost of
Formation is
negligible
5
Formation by
Foreign Nationals
Foreign Nationals
alone can not form
a LLP
Foreign Nationals
alone can form a
Company.
Foreign Nationals
can not form
Partnership Firm in
India
6
Minimum Number
of
Members
Minimum 2 partners
Minimum 2 in case
of Private Company
7 in case of Public
Company.
2
7
Management Team
Minimum 2
Designated
Partners
Minimum 2 / 3
Directors
No requirements
Sl. No
Condition
LLP
Company
Partnership
8
Administration.
Designated
Partners are
responsible for day
to day operations
and statutory
Compliances
Directors are
responsible for day
to day operations
and statutory
Compliances
Partners are
responsible for day
to day operations
and statutory
Compliances
9
Remuneration to
Managerial
Personnel
Remuneration to
partners will be
determined on LLP
Agreement
Remuneration to
Directors of Public
Companies are
governed by
Companies Act
The firm can pay
remuneration to its
partners
10
Tax Liability
Income of LLP
is Taxed at a Flat
rate of **30% Plus
surcharge as
Applicable.
**
Finance Act, 2013
Income of Company
is Taxed at a Flat
rate of 30% Plus
surcharge as
applicable
Income of
Partnership is
Taxed at a Flat
rate of 30% Plus
surcharge as
applicable
Sl. No Condition
LLP
Company
Partnership
11
Transfer of
ownership Rights
Ownership transfer
is governed by the
LLP Agreement.
Ownership is easily
transferable by
transfer of shares
Not Transferable.
12
Annual Filing(RoC)
Annual Statement
of accounts and
Solvency & Annual
Return needs to be
filed every year
Annual Accounts
and Annual Return
needs to be filed
with the Registrar
of Companies
No return except
Tax returns
13
Dissolution
Voluntary or by
order of National
Company Law Tribunal
Voluntary or by
order of Company Law
Board.
By agreement,
mutual consent,
insolvency, certain
contingencies,
and by court
Order
14
Liability
Limited
Limited
Unlimited
15
Corporate Restructuring
(Merger/Amalgamation)
Available
Available
Not Available
Step-1:-Deciding the Partners and Designated Partners
Step-2:-Obtaining DPIN No. & Digital Signature
Step-3:-Checking the Name Availability
Step-4:-Drafting of LLP Agreement
Step-5: Filing of Incorporation Documents
`
Step-6: Certificate of Incorporation
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A LLP can be incorporated with a minimum of at least two partners who can be
Individuals or Body Corporate through their nominees.
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Further for incorporating an LLP, of the total number no. of partners, at least two
shall be Designated Partners, of which at least one must be an Indian Resident.
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Parameters for deciding the Partners and Designated Partners:
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At least Two Partners; Individuals or Body Corporate through individual nominees.
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Minimum of Two Individuals as Designated Partners, of total no. of Partners.
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At least One Designated Partner to be Resident Indian.
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A person ‘Resident in India ‘means a person who has stayed in India for a period of
not less than one hundred and eighty two days during the immediately preceding
one year. (Explanation to Section-7)
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‘Designated Partner’ means a partner who is designated as such in the
incorporation documents or who become a designated partner by and in accordance
with the Limited Liability Partnership Agreement
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Director Identification Number (DIN):
Every Designated Partner is required to obtain a
DIN from the Central Government. If a person
already has a DIN, the same can be used for forming
LLP.
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If DIN/DPIN for partners not available then:
For Filing DIN (Directors Identification
Number/Limited Liability Partners Identification
Number) Form
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Partners Name (with expansion of initials), Father’s Name, Grand Father’s Name, Date of Birth, Place of Birth,
Address, Occupation, Educational qualification, IT Permanent Account No or Passport No or Voter Identity No.,
Phone No. and email address.
PAN Card Copy.
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Proof of identity – Copies of any one -PAN Card , Passport, Voters Identity card
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Address Proof - Copies of any one - Latest Bank pass book or Statement, Ration Card (address should be in
English), Voters ID, Driving License.
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Passport size Photos of all Partners.
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Affidavit in Rs.20 stamp paper for each partner and it should be notarized. (It will be prepared by us – after
obtaining the above details
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The DIN can be applied online at (http://www.mca.gov.in/MCA21/Din.html).
Digital Signature Certificate:
All the forms like eForm 1, eForm 2, eForm 3 etc. which are required for the purpose of
incorporating the LLP are filed electronically through the medium of Internet; it is not
possible to sign them manually. Therefore, for the purpose of signing these forms, the
Designated Partner of the proposed LLP needs to obtain a Digital Signature Certificate
(DSC) from government recognized DSA’s. The signatures shall also be required for
signing and filing of all relevant forms and documents to be filed, annually or event based after
incorporation of the LLP, asking for approvals or as intimation.
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Name of the Partner who is to obtain the DS
Name, Father’s Name, Date of Birth, Place of
Birth, Address, Occupation, IT Permanent
Account No. or Passport No or Voter Identity No.,
Phone No. and email address
One Passport Size Photo
Proof of Identity like PAN card, Voters ID and
Passport
Proof of Address like Bank Statement, Ration
Card or Driving License
The documents – Proof of Identity and Proof of
Address should be attested by a Gazetted Officer
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The next step is to decide the name for the proposed LLP to be
incorporated, anyone intending to incorporate an LLP has to evaluate his
proposed name under the rescribed parameters and make an application
in Form 1 of Rule 18(5) of the Limited Liability Partnership Act 2008, for
reservation of the desired name.
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The name of the limited liability partnership shall not be similar or
identical with Company or LLP already registered in India and it should
not contains words prohibited under the ‘Emblems and Names
(Prevention of improper use) Act, 1950’or which are also not
‘Undesirable’ in the opinion of Central Government or which satisfies the
conditions prescribed under rule 18(2). For more information check Name
Availability Guidelines.
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In case any Body Corporate is partner, copy of Board resolution
authorizing the
incorporation of LLP shall be attached.
 LLP
Name (Preferred one and 2 more
alternative names) with explanation of the
Name coined.
 Main Proposed activity of the LLP
 Partners List
 DIN/DPIN of the Partners
 Digital Signature to be obtained for one of
the proposed Partner/Designated Partner
 Main email ID
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The next pertinent step is drafting of Limited Liability Partnership Agreement
governing the mutual rights and duties among the partners and among the LLP and
its partners.
The basic contents of Agreement are:
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Name of LLP
Name of Partners & Designated Partners
Form of contribution
Profit Sharing ratio
Rights & Duties of Partners
Proposed Business
Rules for governing the LLP
In case no agreement is entered into, the rights & duties as prescribed under Schedule I to
the LLP Act shall be applicable
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It is not necessary to have the LLP Agreement signed at the time of incorporation, as
the details of the same needs to field in eform 3 within 30 days of incorporation
but in order to avoid any dispute between the partners as to the terms & conditions
of the agreement after the formation of LLP, it is always beneficial to have the LLP
Agreement drafted and executed before the incorporation of the LLP.
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In case the Agreement is executed outside India, than it must be notarized and
consularized, for more information check “Incorporation of LLP” under FAQ’s
Next is the filing of Incorporation documents, consent of Partners and
declaration electronically through the medium of e-forms prescribed with the
Registrar of LLP for incorporation of the LLP on payment of prescribed fees
based on the total monetary value of contribution of partners in the proposed
LLP.
Eform 2: Incorporation Document and subscriber's statement
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This is an informative document setting down the details of LLP, its Partners
including designated partners along with their amount of contribution and
consent for forming a Limited Liability Partnership to carry on a lawful
business with profit motive along with declaration stating that all the
requirements of Limited Liability Partnership Act, 2008 regarding
incorporation of LLP in India have been complied with.
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Subscription Sheet:
The partners are required to subscribe their names along with signatures to
the subscription sheet and also along with their consent to become a
partner/ designated partner/ nominee/ nominee & designated partner of
the LLP which shall be witnessed by any Chartered Accountant/Company
Secretary/Advocate in practice.
In case the subscription sheet is executed outside India, than it must be
notarized and consularized, for more information check “Incorporation
of LLP” under FAQ’s
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eForm 3: Details of LLP Agreement
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This form provides for the necessary information in respect to the LLP
Agreement entered into between the partners.
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Only eForm 3 is required to file within 30 days of the incorporation.
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All the eforms will be digitally signed by any designated partner and
shall be certified by an advocate/company secretary/chartered
accountant/cost accountant in practice engaged in the formation of LLP.
Key points:
Filling will be done on www.llp.gov.in
with All the Designated Partners need to be register as Business User.
Digital Signature is required only for the Designated Partner who would
be signing all the e Forms.
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.
The Certificate of Incorporation issued
shall be the conclusive evidence of
formation of the LLP.
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The precondition for conversion for your
partnership firm is
1. Partnership should be a registered under Indian
partnership Act 1932
2. All the partners of existing firm should compulsorily
become the partners of LLP
3. Minimum 2 partners as Designated Partners and
one of them should be Resident in India.
4. Digital Signature Certificate for one of the
Designated Partners.
5. LLP (Limited Liability Partnership) Name.
6. LLP (Limited Liability Partnership) Agreement.
7. Registered Office for the existing partnership firm
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Obtain name approval for LLP (Limited Liability
Partnership)
Application for conversion of firm to LLP in Form 17
File the following forms along with a statement by all
partners with registration number and date of
registration of the firm. Form 2 : Details of partners,
registered office etc Form 4 : Consent of Partners –
Consent of each partner to become a partner of Liability
Partnership Form 3 : LLP agreement – this can be filed
with in 30 days from the date of registration
After verification, registrar will register all documents
and issue Certificate of registration 5. Upon registration
of LLP, file an intimation to the Registrar of Firms stating
the fact that firm is converted into LLP.