Home Legal TemplatesBusinessCorporate Formation Agreement to convert partnership into a limited Liability Partnership

Formation Agreement to convert partnership into a limited Liability Partnership

by crisant
Limited Liability Partnership

What is an Limited Liability Partnership?

Limited Liability Partnership is a hybrid version of a partnership firm and a company. As the name suggests it has a limited liability unlike that of a partnership firm. It includes less compliance unlike in companies. It is governed by the Ministry of Corporate Affairs and regulated by the Limited Liability Partnership Act and agreement between partners. It is a separate entity from partners hence it has a separate legal existence. Hence, partners are not personally liable for the debts of the firm. Further, it has perpetual succession.

What are the benefits of an LLP (Limited Liability Partnership)?

Due to its dynamic structure, it has many benefits as listed below:
• Simple Registration Process
• Limited Liabilities of the Partners
• Separate Legal Existence
• Fewer Compliances
• Unlimited partners
• An Audit is not Mandatory
• Flexibility
•Partners are not agents of other partners

What are the minimum requirements to register an LLP?

There must be at least two individuals to be appointed as Designated Partners, out of which one must be an Indian resident. Also, there is a pre-requisite to have an address of a business in India so as to register it as a registered office for your LLP.

How to incorporate an LLP (Limited Liability Partnership)?


There is an online LLP registration process. It is registered with the MCA. At the time of incorporation, stamp duty has to be paid. Such stamp duty is paid to the state in which the registered office of an LLP is situated. The amount of stamp duty is decided on the amount of capital contributed at the time of incorporation and as per the state’s stamp duty Act. The process of registration is as under:

Who can be partners?

In LLP, two types of partners can be appointed i.e. Designated Partner and Partner. There must be at least two individual designated partners. At least one of them shall be a resident in India. To become a designated partner, DIN is mandatory. A body corporate can also become a partner in LLP. Such body corporates have to appoint a nominee to act as a partner in LLP on behalf of the body corporate. Following persons cannot become a partner.

• A Person with unsound mind
• Undischarged insolvent
• If an application for adjudication of insolvency is pending

What is the difference between designated partner and partner?

Both designated partners and partners are categorized differently in LLP. The designated partners are more liable than the partners. They are accountable for the day to day business activities as well as for all regulatory and legal compliances. Further, the rights and responsibilities can be shared between the partners by entering into an agreement.

What is Director Identification Number (DIN)?

DIN is a Director Identification Number. It is a unique number provided to an individual to become a designated partner in LLP or a director in a company. If a person has DIN then he can become a designated partner easily. Otherwise, DIN shall be allotted by MCA at the time of incorporation of the LLP. Following documents are needed for the application of DIN.

• PAN
• Identity proof (Aadhaar card/Passport/Election card/Driving License)
• Address proof (latest bank statement/utility bill)
If any of the partners is a foreigner, then the passport is mandatory and all the documents must be apostilled. If there are changes in any information relating to the partners such as an address, name, etc. then it must be communicated to MCA in a specified form within 30 days.

What is Digital Signature Certificate (DSC)?

Digital Signature Certificate for partners is provided in the form of a token and issued by Certified Authorities. Any form filed for incorporation of Limited Liability Partnership (LLP) in India online shall be submitted after affixing the DSC of the designated partner.

Which documents are required to register LLP?

For LLP (Limited Liability Partnership) incorporation following documents will be required.

For Designated partner/partner

• Self-attested copy of PAN card
• Self-attested copy of identity proof (Aadhaar card/Passport/Election card/Driving License)
• Self-attested copy of Address proof (latest bank statement/ telephone/ mobile/ electricity/ gas bill)
• Scanned copy of a passport-sized photograph

For Business address proof

• Latest electricity/telephone/mobile/gas bill where the registered office is situated
• NOC from the owner
• Rent agreement if the place is rented

How to reserve the name for an LLP (Limited Liability Partnership)?

LLP name availability is as an essential part for an online LLP registration. The name of an LLP is reserved through a web based form named “LLP-RUN” (Reserve Unique Name). The partners can provide maximum of 2 names in preferential order to reserve any one. The registrar may ask to re-submit the application with different name, if names do not fall under criteria of uniqueness, relevancy or does not fulfil the necessary requirements.

Is there any minimum capital requirements?

No. There is no minimum amount prescribed to form an LLP in India. It can be started with any amount of capital demanded by the business. Although there is no minimum requirement, every partner must make a contribution financially to form LLP. The amount of capital contribution is disclosed in the LLP Agreement and amount of stamp duty is decided by the total contribution amount.

What is an LLP agreement?

LLP (Limited Liability Partnership) Agreement is an agreement executed by all partners after LLP incorporation in India. The agreement prescribes all the clauses related to business, including the rights, roles, duties, and responsibilities of partners in LLP. The agreement must be filed within 30 days of the issue of a certificate of incorporation. Failure to do so will charge an additional fee of Rs. 100 per day till the date of filing.

How stamp duty amount is decided for LLP agreement?

The amount of capital contribution is taken into consideration in deciding the stamp duty on the LLP Agreement in India. The rate of stamp duty varies from State to State. The State Stamp Act will be applied depending on where the registered office is situated.

What are the mandatory compliances for an LLP?

Every LLP (Limited Liability Partnership) has to comply with the post-registration compliances. If such compliances are not followed then LLP shall be liable for penalties. After incorporation, the LLP must open a current account in the name of the LLP and the partners have to deposit the capital contribution as agreed. Following are the mandatory annual compliances for an LLP.

• Filing of Annual return with MCA
• Filing of statement of accounts and solvency with MCA
• Filing of form DIR-3 KYC for all partners with MCA
• Filing of Income tax return

Click Here to Download


ALSO READ:

Related Articles

Leave a Comment

This website uses cookies to improve your experience. We'll assume you're ok with this, but you can opt-out if you wish. Accept Read More

× Chat with us on WhatsApp