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How To Form Limited Liability Partnership ? – It’s Objectives & Advantages
What is Limited Liability Partnership?
Limited Liability Partnership is a hybrid form of structure where features of partnership and companies are combined together, and members can avail the benefit of limited liability while at the same time having the flexibility of organizing their internal management on the basis of mutually-arrived agreement, as in the case in a partnership firm.
The Parliament of India enacted the Limited Liability Partnership (LLP) Act in 2008 to introduced special corporate business to be known as LLP.
Objectives of LLP:
LLP is flexible legal and tax entity allows partners to benefit from economies of scale by working together while also reducing their liability for action of other partners. In some professions, however, you need something a little more customized than a limited liability company with a set structure. LLP is a formal structure that requires a written partnership agreement and usually comes with annual reporting requirements depending on your legal jurisdiction.
In short LLP is more formal than Partnership Firm and you have to fulfill less formality than Private Companies.
Advantages of LLP:
- In an LLP, one partner is not responsible or answerable or liable for another partner’s misconduct or negligence.
- The partners of an LLP have the right to manage the business directly.
- An LLP provides limited liability protection for the owners.
- If the number of partners reduces less then 2, the sole partner can still find a new partner to fill the gape.
- Post incorporation, an LLP can have limitless partners.
- If there is only one partner in an LLP, there is time to find new partner, without dissolution of the LLP.
- It is a separate legal entity.
- LLPs have assets and liabilities that are separate from that of the promoters.
- An LLP can raise funds from partners, Banks, and NBFCs also.
In short LLP have more advantage than Partnership Firm. All LLPs registered in India with the Ministry of Corporate Affairs (MCA) need statement of Accounts and Annual Returns on each Financial Year. Though the LLP has done business or achieved profit, it is mandatory for an LLP to file return. There is three compulsory compliance when you own an LLP.
Procedure of Registration of LLP:
Name of the LLP:
- The Name of proposed LLP shall be determined.
- The name of proposed LLP shall have words LLP or Limited Liability Partnership as last words of its name.
- The name of the proposed LLP shall not be undesirable or identical or too nearly resembles to that of any other LLP or partnership firm or any other body of corporate.
- The name of LLP can be checked on MCA Portal, if any LLP or a Company of such name is already registered or not. If registered, the same name will not be granted.
- The name of the proposed LLP shall not be identical to a registered trade mark or a trade mark for which an application of registration has been filed under Trade Marks Act, 1999 by any other person.
- The significance of abbreviated or coined word in the proposed name shall be specified.
- In case, there is any vernacular language(s) is used in the proposed name, then it should be mentioned
Details to be submitted:
- The detailed address of registered office is to be written
- Address proof of the registered office.
- Details of the owner of the property.
- No objection certificate (NOC) of the owner of the property.
- If the property is not owned but is either on lease or rent, then copy lease agreement or rent agreement of such property.
- Contact details, telephone or mobile no.
- Email address of LLP
- The business activity carried out by LLP shall be determined, manufacturing or resale or both or any other.
- The code of business activity to be carried out by the LLP as per NIC 2004 (National Industrial Classification – A standard industrial classification is essential for developing a proper statistical system in any country) shall be determined.
- The main object of the LLP shall be drafted.
- The business of LLP can not include activities related to purchase or sell of stocks and commodities or related activity.
- There should have minimum two Designated partners.
- The following categorized person are ineligible person to become a partner,
- Unsound mind
- Undischarged insolvent
- Applied for insolvency and application is pending.
- PAN / Passport No / DIN /DPIN of such partner.
- Name, Address, Qualification, Occupation, Date of Birth, Phone/Mobile Number, Email Address of such partner.
- Details of amount of contribution and mode of contribution by all partners.
- No and name of LLPs in which he/she is a partner.
- No and name of Companies in which he/she is a director.
- In case, partner is a body corporate, then the following particulars required:
- Type of Body Corporate
- CIN / FCRN / LLPIN /FLLPIN or any other identification number
- Name, Country, Address, Phone/Mobile Number, Email address/ country of registration
- Details of amount of contribution and mode of contribution
- Name, Nationality, Address, Qualification, Occupation, Date of Birth, Phone/Mobile Number/ Email address of nominee of such body corporate.
- PAN / Passport No. / DPIN of such nominee
- Designation or Authority of such nominee in the body corporate.
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