A Limited Liability Partnership (LLP) is a partnership firm governed by the LLP Act, 2008. LLP allows its partners the flexibility of organizing and managing the internal management based on mutually arrived agreement known as LLP Agreement or Deed. Partners must enter into an LLP Agreement / Deed, which shall contain the rights, duties and responsibilities of all the Partners of the LLP.
A LLP has a distinct legal entity. Registrar of Companies (ROC) registers and controls LLP. A minimum of two partners are required to start a LLP and there is no limit on the maximum number of partners. In addition, there is no minimum capital requirement to start a LLP.
This form of entity is useful for small and medium size enterprises including enterprises in service sector such as professionals and knowledge based enterprises.
Unlike traditional partnership firm, a limited liability partnership has its partners liability limited to the extent of the capital contributed by them in the LLP. A partner of a LLP is not liable for independent or unauthorized actions of the other partners.
A LLP must get their accounts audited if the total contribution exceeds INR 25 Lakhs or the annual turnover exceeds INR 40 Lakhs. A LLP shall maintain books of accounts reflecting true and fair view of its state of affairs.
LLP enjoys the benefit of corporate structure and lesser compliance.
Formation of LLP
- Obtain Digital Signature Certificate (DSC).
- Obtain name approval from MCA by applying with at least two proposed names of the LLP.
- File application for registration of LLP along with documents of registered office, Proof of Identity and Proof of Address of the Partners.
- Prepare LLP Agreement / Deed and file it with ROC.