LLP Formation
What Is
The concept of the Limited Liability Partnership (LLP) changed into delivered in India in 2008. An LLP has the traits of each partnership organization and company. The Limited Legal responsibility Partnership Act, 2008 regulates the LLP in India. Minimum companions are required to include an LLP.
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- An LLP (Limited Liability Partnership) is an alternative form of corporate business entity that combines the advantages of limited liability, similar to a company, with the flexibility inherent in a partnership. Unlike traditional partnerships, an LLP can persist regardless of changes in its partners. It possesses the capacity to enter into contracts and own property in its own name.
- Being a distinct legal entity, an LLP is liable for its obligations to the extent of its assets, while the liability of its partners is restricted to their agreed contributions to the LLP. Additionally, individual partners are shielded from bearing joint liability resulting from the independent or unauthorized actions of other partners, safeguarding them from the repercussions of another partner’s wrongful business decisions or misconduct.
- The rights and responsibilities of partners within an LLP are determined by an agreement among the partners or between the partners and the LLP, as applicable. Although an LLP exhibits characteristics of both a corporate structure and a partnership firm, it is not entirely exempt from liability as a separate entity. Consequently, an LLP is often referred to as a hybrid between a company and a partnership.
The structure of an LLP
An LLP (Limited Liability Partnership) is established as a separate legal entity distinct from its partners, ensuring perpetual succession.
- Contrastingly, in a “traditional partnership firm,” each partner bears joint and several liability for all actions undertaken by the firm during their tenure as a partner.
- Under the LLP framework, a partner’s liability is confined to their agreed contribution. Moreover, no partner is held liable for the independent or unauthorized actions of their counterparts. This shields individual partners from collective liability arising from the wrongful acts or misconduct of another partner.
Difference between LLP & a Company
- One fundamental distinction between an LLP and a joint-stock company is that the internal governance framework of a company is mandated by statute, such as the Companies Act, 1956, whereas for an LLP, it is governed by a contractual agreement among partners.
- Unlike a company, an LLP does not have the inherent separation between management and ownership.
- Additionally, an LLP typically offers greater flexibility compared to a company.
- Moreover, an LLP generally has fewer compliance obligations compared to a company.
Starting from INR, 9,499/-
( inclusive of all taxes )*
Difference between LLP & "traditional partnership firm"
- In a “traditional partnership firm,” each partner holds joint and several liability for all actions undertaken by the firm during their tenure as a partner.
- However, in the LLP structure, a partner’s liability is restricted to their agreed contribution. Furthermore, no partner bears responsibility for the independent or unauthorized actions of other partners, thus providing individual partners protection from collective liability arising from the wrongful acts or misconduct of another partner.
Advantages of LLP form
The LLP form represents a business model that:
- Operates based on an agreement, allowing for organizational structure and operation.
- Offers flexibility without imposing intricate legal and procedural obligations.
- Facilitates the integration of professional/technical expertise with financial risk-taking capacity in an innovative and efficient manner.
Documents required for LLP
- PAN Card, Photograph, and aadhar card of all partners
- Bank information- a copy of the cancelled cheque or bank statement
- Address proof of Principal place of business and additional place of business :
- Own office – Copy of electricity bill/landline bill/ water bill/ municipal khata copy/ property tax receipt
- If Rented office – Rent agreement needed and No objection certificate from the owner
- In case of LLP- Copy of board resolution, Registration Certificate of the LLP
- Proof of appointment of authorized signatory- letter of authorization
