Limited liability partnership (LLP) is a type of legal formed partnership company under ministry of corporate affairs.It provides limited personal liability for the debts of the partnership. Partners will not be liable for the tortious damages of other partners but potentially for the contractual debts depending on the state.
Limited Personal Liability: One of the primary benefits of an LLP is that it provides limited liability protection to its partners. This means that the personal assets of the partners are generally protected from the business's debts and legal liabilities. If the LLP faces financial trouble or legal issues, the personal assets of the partners are not typically at risk beyond their investments in the LLP.
Separate Legal Entity: An LLP is considered a separate legal entity, distinct from its partners. It can own property, enter into contracts, and sue or be sued in its name. This separation of legal identity is important for protecting the personal assets of the partners.
Dissolution and Transition: LLPs can be dissolved relatively easily, especially compared to corporations. The process of adding or removing partners is also typically straightforward.
Professional Services: LLPs are commonly used in professional services industries, such as law, accounting, and consultancy, where partners prefer limited liability and pass-through taxation.
Partnership Agreement: An LLP should have a well-drafted partnership agreement that outlines the roles, responsibilities, and profit-sharing arrangements among the partners. This document is crucial for the smooth operation of the LLP.
1. Secure Digital Signatures:
- Designated partners must obtain Class 3 Digital Signature Certificates (DSCs) from authorized agencies.
- DSCs are essential for secure online filing and signing of LLP documents.
2. Acquire Designated Partner Identification Numbers (DPINs):
- All prospective designated partners must apply for DPINs using Form DIR-3.
- Attach scanned copies of Aadhaar and PAN cards to the form.
- The form must be signed by a practicing Company Secretary, Chartered Accountant, or Cost Accountant.
- Only natural persons are eligible for DPINs.
3. Secure Name Approval:
- Use the MCA portal's free name search tool to ensure uniqueness.
- File the RUN-LLP form to reserve the chosen name.
- The Registrar will approve names that are original and distinct from existing entities.
- Address any defects within 15 days.
- Propose two names for flexibility.
- Apply for LLP incorporation within 3 months of name approval.
4. File Incorporation Form:
- Submit the FiLLiP (Form for Incorporation of Limited Liability Partnership) to the Registrar of the state where the LLP's registered office will be located.
- Pay applicable fees as per Annexure A.
- If needed, apply for DPINs for designated partners through FiLLiP.
- Name reservation can also be done through FiLLiP.
5. Finalize LLP Agreement:
- Draft and execute an LLP Agreement outlining the rights, duties, and responsibilities of partners and the LLP.
- File Form 3 online on the MCA portal within 30 days of incorporation.
- Print the LLP Agreement on stamp paper of the value specified by the state.
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