About LLP India : Company Registration Mumbai : Formation of LLP in India

LLP is a partnership formed and registered under the LLP Act, 2008. LLP is a hybrid business structure combining the features of a Partnership Firm as well as Limited Liability Company. LLP is a body corporate with perpetual succession and has a separate legal identity distinct from its partners. Further, the liability of the partners is limited to their agreed contribution in the LLP which may be of tangible and/or intangible nature.

Main Features :-

Hybrid business entity combining features of partnership firm and company.
Limited Liability of partners.
Simple to incorporate.
No limit on maximum number of Partners as against restrictions in partnership firm.
Body corporate with legal entity separate from its partners.
Perpetual existence like a company.
Capacity to sue and to be sued like a company.
Non-applicability of The Indian Partnership Act, 1932.

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Partners and their relation :

Any other person may become a partner of an LLP by and in accordance with the LLP Agreement.
The mutual rights and duties of the partners and that of a LLP and its partners shall be governed by the LLP Agreement between the partners or between the LLP and its partners. The Act provides flexibility to devise the agreement as per the choice of partners.
In the absence of agreement as to any matter, the mutual rights and duties of the partners and the mutual rights and duties of the LLP and the partners shall be determined by the provisions relating to that matter as set out in the First Schedule to LLP Act
A person may cease to be a partner of a LLP in accordance with the agreement with the other partners or, in the absence of such an agreement, by giving a notice in writing not less than 30 days to the other partners of his intention to resign.
LLP shall file notice with ROC within 30 days from the date on which the person ceases to be a partner.
Where a person has ceased to be a partner of a LLP, such person is to be regarded (in relation to any person dealing with the LLP) as still a partner of the LLP unless the other person has notice of cessation or notice of cessation has been delivered to the ROC.
The cessation of a partner from the LLP does not by itself discharge the partner from any obligation to the LLP or to the other partners or to any other person which he incurred while being a partner.

Extent and limitation of liability of LLP and its partners :

Every partner of a LLP is, for the purpose of business of the LLP, an agent of LLP but not of the other partners.
A LLP is not bound by something done by a partner in dealing with a person if the partner does not have authority to perform that particular act and the person dealing with the LLP has knowledge of the same or does not know or believe him to be a partner of the LLP.
LLP will be liable if a partner is liable to any person as a result of wrongful act or omission on his part in the ordinary course of business.
Obligations of LLP, arising in contract or otherwise, shall be solely the obligation of LLP. However, a partner shall not be personally liable solely by reason of his being a partner of the LLP. Neither shall he be personally liable for the wrongful act or omission of any other partner of the LLP.
Liabilities of the LLP shall be met out of the property of LLP.
If any act is carried out by a LLP or any of its partners, with an intent to defraud its creditors or any other person or for any fraudulent purpose, the liability of the LLP and its partners who acted with an intent to defraud the creditors or for any fraudulent purpose shall be unlimited for all or any of the debts or other liabilities of the LLP.

Minimum number of partners :-

Every LLP shall have at least two partners and shall also have at least two individuals as Designated Partners, of whom at least one shall be resident in India. The duties and obligations of Designated Partners shall be as provided in the law.

Maintenance of books of accounts and audit :-

Every LLP shall be under an obligation to maintain annual accounts reflecting true and fair view of its state of affairs. A statement of accounts and solvency shall be filed by every LLP with the Registrar every year. The accounts of LLPs shall also be audited, subject to any class of LLPs being exempted from this requirement by the Central Government

Conversion of existing business structure into LLP :-

Any existing firm, private company or an unlisted public company is allowed to be converted into LLP in accordance with the provisions of the Act.

All LLPs should have the word ‘Limited Liability Partnership’ or the acronym ‘LLP’ as the last words of its name.

Advantages and Disadvantages :-

Advantages :-

Liability is limited to the extent of agreed contribution of partners.
Formation is easy and less expensive.
No limit on maximum numbers of partners.
All partners not be responsible for acts of defaulting partner.
Operation easy similar to existing partnership firms.
Existing firms and companies can be converted to LLP.
Lesser Compliance, Govt. intervention, Statutory record then Company.
Professionals also can form LLP to get Shield of Limited Liability.
Audit exemption till capital / contribution of Rs.25 lacs or Turnover of Rs.40 lacs per annum.

Disadvantages :-

Not allowed to raise loans from Public.
Action of single partner can bind LLP.
Shield of limited liability may be pierced in some cases.

Comparison of LLP with Partnership Firm and Company

S. No	Topic	Partnership	Company	LLP
1	Registration	Optional under Indian Partnership Act 1932.	Yes under the Companies Act, 1956	Yes under the LLP Act, 2008
2.	Separate Legal Identity	No, partners are representatives of firm	Yes it is a separate entity different from owners or directors.	Yes it is a separate entity different from Partners / Designated Partners.
3.	Law for name	Any name as per choice of partners	Approved Name to contain 'Limited' in case of Public Company or 'Private Limited' in case of Private Company as suffix.	Approved Name to contain 'Limited Liability Partnership' or 'LLP' as suffix.
4.	Duration	Depends upon the duration as stipulated in the partnership deed OR will of partners	It has perpetual succession till it is wound up through legal process by owners or creditors.	It has perpetual succession till it is wound up through legal process by partners or creditors.
5.	Basic Legal Document	Partnership Deed	Memorandum and Article of Association	LLP Agreement / Schedule I to LLP Act in the absence of LLP Agreement
6.	Legal action for business	Only registered partnership firm can sue third party	A company is a legal entity which can sue and be sued in its own name	LLP is a legal entity and can sue and be sued in its own name
7.	Foreign Investments	Not allowed from Foreign Nationals	Allowed	Allowed
9.	Minimum and Maximum Number of Owners / Partners	2 to 20	2 to 50 members for Private Company and 7 to unlimited for Public Company.	Minimum 2 partners maximum is unlimited.
10.	Ownership of Assets	Jointly by all partners with respect to the assets of partnership firm	In the name of the Company only	In the name of LLP only
11.	Responsibilities and Authorities	Governed by Partnership Deed	Governed by Articles of Association read with resolution passed by shareholders or directors	Governed by LLP Agreement
12.	Liability	Unlimited and hence all Partners are severally and jointly liable including claims on personal assets of partners	Limited to the extent of amount unpaid on the shares held by the respective shareholders	Limited, to the extent of contribution of Partners stipulated in the LLP agreement.
13.	Taxation on profits	30% flat	30% flat	Tax status on double taxation possibility is yet not clarified from Govt. under Tax laws.
14.	Transfer / Transmission	Not possible	Legally allowed	Depends upon LLP Agreement
15.	Winding up	As per Deed or mutual consent, insolvency, certain contingencies and by court order.	Voluntary or by order of Court	Voluntary or by order of Court
16.	Conversion	Possible to convert to Company or LLP	Possible to convert to LLP	Possible to convert into Company

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Filing of returns with Registry :-

Every LLP is required to prepare, within a period of six months from end of each financial year, a statement of Account and Solvency for the said financial year. Such statement shall be filed by the LLP with the ROC within such time and in such form as may be prescribed.
Every LLP shall also file its Annual Return with the Registrar within sixty days of closure of the financial year

Audit :-

LLP has to appoint Statutory Auditor viz. Chartered Accountant initially for the first year immediately on incorporation and thereafter every year 30 days before the end of financial year.

The Designated Partner/s will be authorized and be responsible for the compliances of all LLP and also with regards to appointment of the auditor. However if the designated partner fails to appoint the auditor then remaining partners can appoint the auditor.