Limited Liability Partnership (LLP)

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Introduction:

Features:

The minimum number of partners required to form an LLP is two.
LLP must have a minimum capital of INR 1 Lakhs.
LLP must have the last words "Limited Liability Partnership" or "LLP" in its name.
LLP is required to comply with certain annual formalities, such as filing annual returns and financial statements.
LLP is required to appoint a designated partner who is responsible for compliance with the LLP Act.
LLP is required to appoint an auditor if the turnover exceeds INR 40 Lakhs or contribution exceeds INR 25 Lakhs.

Procedures:

Obtain Digital Signature Certificates (DSC) and Director Identification Number (DIN) for all the designated partners.
File the e-forms with the Registrar of Companies (ROC) along with the necessary documents such as the LLP Agreement and Statement of Account and Solvency, along with the required fees.
Obtain the certificate of incorporation from ROC.
Obtain PAN and TAN for the LLP.
Open a bank account in the LLP's name.

Documents Required:

DSC and DIN of the proposed designated partners
LLP Agreement and Statement of Account and Solvency
Proof of identity and address of the proposed designated partners (such as PAN card, passport, driving license, voter ID, or utility bill)
NOC (No Objection Certificate) from the owner of the proposed registered office address
Affidavit from the proposed designated partners, stating that they are not disqualified from being appointed as designated partners
Other documents as required by ROC

Advantages:

Separation of ownership and management
Limited liability protection for partners
Flexible profit-sharing arrangements among partners
No minimum capital requirement
Easy to form and maintain

Disadvantages:

Strict compliance requirements
Limited ability to raise capital: An LLP has limited ability to raise capital compared to a private limited company or a public limited company.
Limited ability to sell ownership: An LLP has limited ability to sell ownership compared to a private limited company or a public limited company.
Potential for conflicts among partners: An LLP may have conflicts among partners, which can lead to disagreements and potential legal disputes.
Greater regulatory oversight: LLPs are subject to greater regulatory oversight, which can be burdensome and may lead to delays in decision-making.
No provision for the appointment of alternate designated partners.

Difference With Partnership Firm

Legal status: An LLP is a separate legal entity from its partners, while a partnership firm is not.
Liability: Partners in an LLP have limited liability for the debts and liabilities of the LLP, while partners in a partnership firm have unlimited liability.
Minimum number of partners: An LLP must have at least two partners, while a partnership firm can have any number of partners.
Minimum Capital: LLP must have a minimum capital of INR 1 Lakhs, while a partnership firm has no minimum capital requirement.
Compliance: An LLP is subject to more compliance requirements than a partnership firm.
Name: LLP must have the last words "Limited Liability Partnership" or "LLP" in its name, while a partnership firm can have any name.
Designated Partner: LLP is required to appoint a designated partner who is responsible for compliance with the LLP Act, while a partnership firm doesn't require to appoint a designated partner.
Auditor: LLP is required to appoint an auditor if the turnover exceeds INR 40 Lakhs or contribution exceeds INR 25 Lakhs, while a partnership firm is not required to appoint an auditor.
Separation of ownership and management: In LLP, there is a separation of ownership and management, while in a partnership firm, partners are involved in the day-to-day management of the firm.

Conclusion

A Limited Liability Partnership (LLP) is a form of business structure in India that combines the features of a partnership and a private limited company. It is a separate legal entity from its partners, and the partners have limited liability for the debts and liabilities of the LLP. The minimum number of partners required to form an LLP is two, and LLP must have a minimum capital of INR 1 Lakhs. LLP have to mandatorily have the last words "Limited Liability Partnership" or "LLP" in its name, and is required to comply with certain annual formalities, such as filing annual returns and financial statements. LLP also have to appoint a designated partner and an auditor if the turnover exceeds INR 40 Lakhs or contribution exceeds INR 25 Lakhs. LLP has advantages such as Separation of ownership and management, Limited liability protection for partners, Flexible profit-sharing arrangements among partners, No minimum capital requirement, Easy to form and maintain but also has disadvantages such as Strict compliance requirements, Limited ability to raise capital, Limited ability to sell ownership, Potential for conflicts among partners and Greater regulatory oversight. It's always a good idea to consult with a professional before starting an LLP or for any specific advice. An experienced professional can guide you through the process of registration and compliance, and help you to make the best decision for your business.