LLP Incorporation

Limited Liability Partnership LLP is an alternate hybrid corporate business form. This new business structure was formulated in order to provide limited liabilities to the partners in the said business. LLP is a unique business form, as it provides a combination of limited liability like that of a company and the flexibility of a partnership in a single organization.

It is the most favored alternate business form among entrepreneurs and business professionals. The Limited Liability Partnership Act was enacted in 2008 and is responsible for all the LLP-related regulations in the country. Limited Liability Partnerships have proven to be a much more flexible and efficient way to conduct a business or a firm as it allows partners to formulate the structure of their partnership with LLP as it suits them. 

Limited Liability Partnership is a newly established concept introduced by the LLP Act in 2008. LLP after incorporation becomes a separate legal entity and acquires all the natural rights held by a person. It means that the LLP, like a person, can be sued or can sue; it can sign contracts, buy and sell property on its own and much more.

Also, LLP is much cheaper and easier to operate as it has fewer compliances in comparison to a private limited company. It can be said that an LLP is nothing but a business form that gives the benefit of limited liability to entrepreneurs and professionals as well as the freedom to develop a well-structured partnership for their said business. The LLPs once incorporated are governed by Schedule One of the LLP Act unless the partners or LLP and the partner have created an LLP agreement. 

Key benefits of LLP incorporation:

• A separate Legal entity

• Flexibility to draft rules and duties regarding partnership agreement

• No requirement for minimum capital contribution

• Fewer compliances and fewer regulations

• Easier and cheaper to operate  

• Easier to dissolve

• Limited Liability

What is an LLP agreement?

The LLP agreement has to be filed and executed within 30 days of LLP incorporation with the Ministry of Corporate Affairs. An agreement made to determine the rights and duties of the partners towards each other or towards the LLP is an LLP agreement. It determines the roles and duties of the partners as well as changes in the roles of the partners.  It also looks after the addition of a new partner as well as the exit of an existing partner. Therefore LLP agreements strengthen the company and play an important role in the smooth functioning of the said company. If there is no such LLP agreement constituted, then the LLP will be governed by Schedule One of the LLP Act.

Following are some of the key contents required while making an LLP agreement:

1) Name of the LLP

2) Date of the agreement 

3) Parties to the agreement

4) Contribution of the partners (capital contribution and profit ratios)

5) Admission of new partners and dissociation of partners

6) Place of business

7) Business activity

8) Books of Accounts and Audits

9) Allocation and distribution of profits

The agreement also contains other general and arbitrary provisions as per the requirements of the partners.

How to get LLP incorporated?

The incorporation of an LLP basically means registering it with the Ministry of Corporate Affairs (MCA). The process of incorporation is simple yet can be time-consuming and tricky. A minimum of two partners are required to incorporate an LLP and anyone partner should be a citizen of India. If an LLP agreement is made, the rights and duties of the partners are determined by it. The LLP agreement is directly responsible for compliance with all the provisions of the LLP Act, 2008. Following is the procedure to incorporate an LLP:

1) To obtain a DSC (Digitally Signature Certificate)

2) Apply for DIN (Directory Identification Number)

3) RUN-LLP (Reserve Unique Name) approval

4) Incorporation of LLP

5) File for LLP agreement

The procedure requires to be followed precisely step by step. Moreover, various documentations of partners and LLP are also a prerequisite while incorporating an LLP. It takes approximately 15 days to successfully register an LLP; this is subject to the availability of all the documents.