Limited Liability Partnership - a new concept

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2. The Limited Liability Partnership Act
2008 does not def ine limit ed liabilit y
Part nership as such.
I n simple words limited liability
partnership is “a legal business ent it y
part nership whereby t he LLP is
responsible f or t he debt s of t he
business and not t he part ners.”
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3.  LLP shall be a body corporate and a legal entity separate from its
partners. It will have perpetual succession; like a corporation;
 The Limited Liability Partnership shall be required to have
Minimum- at least two partners
Maximum- no limit
 Any individual or body corporate may be a partner in an LLP.
 The provisions of the Indian Partnership Act, 1932 shall not be
applicable to an LLP.
 Every LLP is required to have either the words limited liability
partnership or the acronym LLP as the last words of its name.
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4. 1) Partner is the agent of the LLP and not of the partners.
2) LLP is not bound by the acts of partners, has no authority to act for
LLP.
3) LLP is liable if a partner is liable to any person as a result of wrongful act or
omission on his part in the course of the business of LLP or with its
authority.
4) Obligations of LLP shall be solely obligation of LLP and not the
partners.
5) Partner is not personally liable (directly or indirectly) for any obligation of
the limited liability partnership whether arising in contract or otherwise.
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5. 6) Unlimited liability of LLP and partners in case of fraud.
a) In the event of an act carried out by a LLP or any of its partners, with
intend to defraud creditors of the LLP or any other person for any fraudulent
purpose, liability of that person shall be unlimited for all.
b) Where any person knowingly carried on a business in the manner
foresaid be punishable with imprisonment for a term which may extend to 2
years and fine of minimum 50,000 and which may extend to
5,00,000.
c) LLP and such partner shall be liable for compensation to any
person who has suffered any loss or damage by reason of such conduct.
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7. Steps required to be followed :-
Step 1: Deciding the partners and Designated partners
1. A LLP can be incorporated with a minimum of at least two
persons who can be individuals or Body Corporate/company
through their nominees.
2. Out of the total number of partners, at least two shall be
designated partners.
3. Among those designated partners at least one must be Indian
resident.
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8. Parameters for deciding the Partners and
Designated Partners :
1) Partners of LLP
 minimum 2 partners.
 In case, any Body Corporate is a partner, then it will be required to
nominate any person (natural) as its nominee for the purpose of the
LLP.
Partner of LLP can be consisted of
 Companies incorporated in and outside India.
 LLP incorporated in and outside India.
 Individuals Resident in and outside India.
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9. 2) Designated Partner
 Every LLP should have minimum 2 designated partners who are
individuals and at least one of them should be resident in India.
 A person or nominee of a body corporate, intending to be appointed as
or who is appointed as designated partner of LLP should hold a
Designated Partner Identification Number (DPIN) allotted by the
Ministry of Corporate Affairs.
 DPIN can be obtained by submitting application along with address proof
and identity proof of the individuals.
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10. `Step 2 : Obtaining DPIN No. and Digital signature
1) Designated Partner identification number (DPIN)
 Section 7(6) of LLP act 2008, provides that every Designated
Partner must obtain it.
 DPIN is an eight digit numeric number allotted by the Central
Government in order to identify a particular partner .
 It can be obtained by making application in e-Form 7 to central govt.
with physical application, identity and address proof of the person with
filing fee of Rs.100.
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11. 2) Digital Signature Certificate
Partner/Designated partner of LLP/proposed LLP, whose
signatures are to be affixed on the e-forms has to obtain class
2 or class 3 Digital Signature Certificate (DSC) from any
authorized certifying agency (CS/CA).
Note:- At least one Designated Partner has to obtain the digital
signature certificates.
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12. Step 3 : Checking the name availability and reservation of name.
Anyone intending to incorporate an LLP has to evaluate his proposed name
under the prescribed parameters and make an application in e-Form 1 of
Rule 18(5) of the Limited Liability Partnership Act 2008, for reservation
of the desired name.
 Name must not be similar with company or LLP already registered in India.
 It should not contain words prohibited under the Emblems and Names
Act,1950 i.e. undesirable by govt.
 Upto 6 choices can be indicated .
 File e-Form1 along with a filing fee of Rs 200.
 Any partner or designated partner in the proposed LLP may submit e-form1.
 Details of designated partners (one of them must be resident in India).
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13. Step 4 : Drafting of LLP agreement
The next 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:
1. Name of LLP
2. Name of partners and Designated partners
3. Form of contribution
4. Profit sharing ratio
5. Rights and duties of partners
6. Proposed business
7. Rules for governing the LLP
.
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14. Note :
 In case no agreement is entered into, rights and duties as prescribed
under Schedule 1 of LLP act shall be applicable.
 It is not necessary that LLP agreement should be signed at the time of
incorporation, as the details of the same needs to filed in e-form 3 within
30 days of incorporation but in order to avoid any conflict regarding
the terms and conditions , it is beneficial to have the LLP agreement
drafted and executed before the incorporation.
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15. Step 5 : Filing of Incorporation documents.
1) Filing of incorporation documents
Documents required:
a) E-form 1- Name Availability Application
b) E-form 2- Incorporation Document
c) E-form 3- Details of LLP Agreement
d) E-form 4- Consent of partners (with ID and address proof)
e) E-form 7- Application for DPIN.
f) Subscription sheet .
g) LLP agreement duly stamped as per Stamp Act of State.
h) Proof of address of Registered Office.
I) Consent of Partners and Designated Partners
2) Electronic declaration to Registrar of LLP for incorporation.
3) Payment of prescribed fees.
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16. b) E-Form 2 : Incorporation Document
 Once the name is reserved by the registrar, fill up e-Form-2 Incorporation
Document and statement.
 Statement in the e-form is to be digitally signed by designated partner
having permanent DPIN and also to be digitally signed by an
advocate/CS/CA in practice.
 This document includes the amount contribution and consent of
partners for forming a limited liability partnership to carry on a lawful
business with profit motive and 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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17. c) E-Form 3 : Details of LLP Agreement
 This form provides for the necessary information in respect to the LLP
Agreement entered into between the partners.
d) E-Form 4 : Consent of Partners
 Consent of each partner to become a partner of Limited Liability Partnership
along with their address and identity proof to be filed with the Registrar of
Companies.
Note: E-Form 3 & 4 are required to filed within 30 days of the
incorporation.
f) Subscription sheet : Just like in case of Company formation, the
partners are required to subscribe their names along with signatures to the
subscription sheet, which shall be witnessed by any CA/CS/advocate.
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18. Step 6 : Certificate of Incorporation
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 of filing Form-2 and will issue a Certificate of
Incorporation in Form-16.
Note: The certificate of incorporation once issued shall be the
conclusive evidence of formation of the LLP.
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19. 19

20. Basis of
Difference
LIMITED
LIABILITY
PARTNERSHIP
PARTNERSHIP
FIRM
COMPANY
1. Governing
Law
The Limited Liability
Partnership Act, 2008
The Indian Partnership
Act, 1932
The Companies
Act, 1956
2. Registration Compulsory Optional Compulsory
3. Foreign
Nationals as
shareholder /
Partner
Foreign nationals can
be partners.
Foreign nationals
cannot form
partnership firm.
Foreign nationals
can be
shareholders.
4. Separate
Legal Entity
Separate legal entity,
separate from its
partners/designated
partners.
Not a separate legal
entity from partners.
Partners are
collectively referred as
firm.
Separate legal
entity, separate
from its member,
directors.
5. Perpetual
succession
It has perpetual
succession
It does not have
perpetual succession.
It has perpetual
succession
6. Common
Seal
LLP have its own
common seal
Not required Every company
have its own
common seal.
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21. 6. Name Suffix ‘LLP’ or Limited
Liability Partnership
has to be added to the
name.
No such requirement Suffix ‘Limited’ or
‘Private Limited’ has to
be added to the name.
7. Ownership of
Assets
The LLP has ownership
of assets and Partners
only have capital
contribution in the LLP
Partners have joint
ownership of all the
assets
The company has
ownership of assets and
members only have
shares in the company.
8. Liability of
partners/
members
Limited (upto their
capital contribution),
Unlimited limited to the extent of
shares held by them.
9. Agency
Relationship
Partners are agents of
LLP only, not of other
partners.
Partners are agents of
the firm and each
other
The Directors act as an
agents of the company.
10. Charter LLP Agreement is a
charter of the LLP
Partnership Deed is a
charter of the firm.
Memorandum and
Articles of Association is
a charter of the
Company
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22. 11. Minimum Capital
requirement
No such
requirement
No such requirement Minimum paid up
capital of Rs. 1,00,000
for incorporation of
Private company and
Rs. 5,00,000 for
incorporation of
Public company.
12. Minimum Number
of Partners / Members
Minimum- 2 partners Minimum- 2 partners Minimum- 2 (private
Company),
minimum-7 (public
company)
13. Maximum number
of Partners / Member
Maximum- no limit Maximum 10 (banking
business) and
20 (other business)
Maximum- 50 (Private
Company),
maximum- no limit
(Public Company)
14. Manner of Keeping
Books of Accounts
Cash basis or accrual
basis
Cash basis or accrual
basis
Accrual basis
15. Voting Rights Each partner has
only one vote
No voting rights Voting rights are in
proportion to the shares
held by members.
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