Limited Liability

Partnership Act
2008

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LLP HISTORY

• Origin in Italy as a Medieval European Business mode

• France, Germany Great Britain, USA, Japan started following

• First time, LLP was brought under regulation in France in 1673 by

an Ordinance of state.

• In US first law on LLP was codified in 1822

• In Great Britain it was enacted in 1867

• In Germany it was enacted in 1892

• In Singapore it was enacted in 2005

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LLP (history in Indian Legislative)

• 1957- Suggested by iron, steel & hardware merchant chambers-

rejected by 7th Law commission
• 1997- Recommended by Abid Hussain Committee on Small Scale
Industries
• 2003-Naresh Chandra Committee Report (Regulation of Private
Companies and Partnerships) highlighted the grave need to
introduce LLPs in India
• 2005- JJ Irani Expert Committee on Company Law recommended
introduction of LLPs
• December 15, 2006: 2006 LLP Bill introduced in Parliament
• May 1, 2008: Union Cabinet gave its approval to introduction of a
new bill (2008 LLP Bill) replacing the 2006 LLP Bill
• October 21, 2008: LLP Bill 2008 introduced in Parliament
• January 7, 2009: President’s assent given to the LLP Bill 2008 after
being passed in Loksabha and Rajyasabha
• March 31,2009-ACT Notified & came into existence
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 Literal meaning of LLP
 A corporate business vehicle that enables professional expertise and
entrepreneurial initiative to combine and operate in flexible, innovative
and efficient manner, providing benefits of limited liability while allowing
its members the flexibility for organizing their internal structure as a
partnership.

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Benefits as Compared to Corporate Form

Ω Easy to Form
Ω Easy to Run & Manage
Ω Low cost of Formation
Ω No Minimum Contribution
Ω No Stamp Duty as on date
Ω Less Government Intervention
Ω Less requirement as to maintenance of statutory records
Ω Less Compliances
Ω No Minimum Alternate Tax as on Date
 Partnership LLP Pvt. Ltd.
Liability of Unlimited Limited (% of Limited
Partnership Liability assests shared in
the loss time
companies assests
can be sold out)

Joint liability 40:30:30 - -

Compliances Least Medium (40 lakh High
u need audit)

Governing According to Deed Agreement

documents or Agreement MOA, AOA

Ownership & Partners Partners Different e.g.

Management TATA employees
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Benefits as Compared to Partnership Form

Ω Unlimited No. of Partners

Ω Limited Liability of Partners

Ω No Liability for the wrongful act of other Partner.

Ω Less exposure to personal assets of the partners

Drawback of LLP
Any act of the Partner without the other may bind the LLP.

The Act does not provides any provision for raising of money
from Public via public issue.

Lot of formalities on closure of Business.

Tax Liability of LLP
Indian Government, Ministry of Finance has not yet specified any
regulatory framework for taxing LLPs.

Income will be taxed Alike traditional

OR Partnership Firms
either in the hands of
Partner to the extent of income will be taxed
their Profits. in the hands of LLP

Alike worldwide LLPs, an option may be there to tax the

income either in the hands of the LLP or in the hands of the
Partners.
Formation of LLP

VI - Certificate of Incorporation

V - Filing of Incorporation Document

IV - Drafting of LLP Agreement

III - Checking name Availability for LLP

II - Obtaining DPIN & Digital Signature

I - Deciding the Partners & Designated partners

 AN INSIGHT IN TO LIMITED LIABILITY PARTNERSHIP ACT

Some Important Definitions:

 2(1)(d) Body Corporate means a co as defined in S.3 of the Cos

Act & includes - LLP regd in India, Incorporated o/s India, A Co
regd outside India but does not include a corporation sole, Co-op
society, any other body corporate.
 2(1)(l) Financial year : ending on 31st march year
 S.5- Any Individual or body Corporate can be a partner
 S.11(1)- Dealing with Incorporation reads as – For a LLP to be
incorporated (a)– 2 or more persons associated for carrying on a
lawful business with a view to profit shall subscribe their names
to an incorporation document

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Features of LLP

Body Corporate

Separate Legal
Identity
ty
l i cabli Act
ap hip
Non artners
Of P
t u res
Fea Perpetual
Succession

Only with Profit Motive

Limited Liability of
Partners
Who can be Partner?

Individual

And/OR

Body Corporate
Body Corporate

“Body Corporate” Includes

 Limited liability partnership registered under LLP Act

 Limited liability partnership incorporated outside
India and
 Company incorporated outside India,

Even all the Foreigners can form a LLP in India. Since a

partner need not to be resident in India except a designated
Partner who should be resident in India.
Role of Partner

 Right to participate in Management

 For Business Purposes Agent of Limited Liability Partnership,

not of other Partners.

 Ethical duty to comply with all provisions of LLP Act and LLP
Agreement.
Liability of Partners

 Limited to the Extent of their Contribution

 Not Liable for the wrongful Acts /Omissions of other

Partners
 Not Liable for Obligation of LLP arising out of a contract.

 Unlimited Liability of relevant Partners in case of

Fraud.
Designated Partners

“Designated partner” means any partner designated as such pursuant

to Section 7 of Limited Liability Partnership Act 2008 .

Responsible for managing the day to day affairs and ensuring the
compliances of all applicable laws.

Requirement for Designated Partners

Designated Partner Identification Number

Only Individual can be the Designated Partners.

At least One designated Partner should be resident in India.

In case of Body Corporate their nominees can be the Designated

Partners.
 LLP AGREEMENT
 It is a written agreement between the partners of the limited liability
partnership and between the limited liability partnership and its
partners which determines the mutual rights and duties of the
partners and their rights and duties in relation to that limited
liability partnership.

 It is not necessary to enter into an LLP agreement as per LLP

Act,2008. In the absence of LLP agreement, the mutual rights of
partners & in relation to LLP will be determined as per schedule I of
the LLP Act,2008.

 Due to varied nature of different type of businesses, it may not be

practically advisable to have those standard clauses as mentioned in
schedule 1. Therefore, it is advisable to have a legally drafted
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agreement
 LLP AGREEMENT
Main Features of the Agreement
1. Parties (Individuals or body corporate sec. 5 LLP)
2. Objective
3. Definition and interpretation Clause
4. Commencement of business of LLP
5. Duration of LLP
6. Designated Partners (LLP Act) Working partners (IT Act).
7. Role of Partners in Management
(Otherwise any partner can take part in Management)
8. Contribution of Partners (in cash or in kind).
9. Partners’ powers, duties and authorities.
10. Define share in the capital, profit and Losses
(otherwise equally as per Sch 1.)
11 Specify Remuneration to working partners
(otherwise no remuneration) [(See I.T.Sec. 40(b)]
12. Define Interest to partners [Sec.40(b) of I.T. Act allows
interest up to 12% only]
13. Power to expel (otherwise nobody can be expelled as per Schedule)

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Step I Incorporation

Deciding the Partners & Designated partners

Parameters for deciding the Partners and Designated Partners:

 At least 2 Partners - Individuals or Body Corporate

 Minimum Two Designated Partners of total no. of Partners – Individuals

or Nominee of Body Corporate.

 At least One Designated Partner to be Resident Indian.

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Step II Incorporation

Obtaining DPIN & Digital Signature

 DPIN – Designated Partner Identification Number

 DPIN - 8 digit Numeric Number

 Online application in Form 7 to Central Government

 Submitting the physical application along with Identity and Address

Proof of the person applying with prescribed fees.

Digital Signatures are required for signing of e - forms by Designated Director.

Step III Incorporation

Checking name Availability for LLP

 Not Prohibited under Emblems ‘Emblems and Names (Prevention

of Improper use) Act, 1950

 Use of Certain words require prior approval like in case of Bank RBI
prior approval is required.

 e Form 1 to be filed with ROC.

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Step IV Incorporation

Registration of LLP Agreement

 LLP Agreement is Optional.

 In absence of LLP Agreement Schedule 1 will be applicable.

 In case of Agreement – Draft to be prepared before filing of

Incorporation Documents.

 Registration through e Form 3 – 30 days of Incorporation

 Features of Schedule 1

 All partners entitled to share equally in the Capital and

Profits/losses.
 Indemnity Clause
 Every Partner shall take part in management
 No partner shall be entitled to remuneration.
 No partner introduced without consent of all partners.
 All decisions with majority of partners consent
 Minutes to be recorded within 30 days
 Render True Accounts
 All Disputes will be referred to Arbitration Act
Step V Incorporation

V - Filing of Incorporation Document

 e Form 2 – Incorporation Document along with Subscription Sheet

 Certification from Practicing Professional

 e Form 4 – Consent of Partners & Designated Partners

Step VI Incorporation

Certificate of Incorporation

 On Successful Compliances – ROC LLP Issue Certificate of Incorporation.

 Conclusive Evidence of Registration of Limited Liability Partnership

Incorporation Fee

Contribution up to 1 lakh Fee Contribution More than Fee

10 lakh

Form 1 (Name Availability) 200 Form 1 (Name 200

Availability)
Form 2 (Incorporation 500 Form 2 (Incorporation 5000
Document) Document)
Form 3 (LLP Agreement 50 Form 3 (LLP Agreement 200
Registration) Registration)
Form 4 (Partners Consent) 50 Form 4 (Partners 200
Consent)
Incorporation Fee 800 Incorporation Fee 5600

Beside this fee the LLP Agreement Stamping Fee would be there as per
the respective state stamping requirement – yet to be notified
Conversion of LLP
Who can Convert ?

 Partnership Firm
 Private Company
 Unlisted Public Company

Whether LLP can convert its status to Corporate Form ?

No
Procedure of Conversion of Company to LLP

VII - Information of Conversion to ROC

VI - Certificate of Registration
V- Filing of Incorporation Document
IV - Checking name Availability for LLP

III - Filing of Conversion Application

II - Obtaining DPIN & Digital Signature

I - Deciding the Designated Partners
Compliances of LLP

Compliances with
• EVENT
ROC LLP BASED

Compliances with • REGULAR

ROC LLP
Event Based Compliances of LLP
Compliance Section e-form Time Limit Penalty for Non - Compliance

Filing of Consent of 7(3) Form 4 Within 30 days of Minimum 10,000 & Maximum
Designated Partners appointment 1,00,000

Filing of Change in 25(2) Form 4 Within 30 days of Minimum 2,000 & Maximum
Partners Change 25,000
Filing of Change in 23(2) Form 3 With in 30 days of Minimum 5,000 & Maximum
LLP Agreement Change 5,00,000 with an additional fine of
Rs. 50 per day after which the
default continues.
Shifting of 13(3) Form 15 Within 30 days of Minimum 2,000 & Maximum
Registered Office Compliance 25,000
Change of Name 19 Form 5 With in 30 days of Minimum 5,000 & Maximum
Compliance. 5,00,000 with an additional fine of
Rs. 50 per day after which the
default continues

LLP Form is based on Self Compliance.

To have a check on Self Compliance Act has prescribed heavy Penalties

on Non - Compliance
Regular Compliances of LLP
Filing of Statements of Accounts & Solvency – Within 6 months of closure of
Financial Year.
Section34(2)

Filing of Annual Return – with in 60 Days of closure of Financial Year

Section
35(1)
Penalty for Non –Filing will be Rs. 100 per day - Rs. 3000 for a month where as
in case of Company with a capital of Rs. 1 lakh penalty will be only Rs. 200 for
Non –Filing up to 30 days

The maximum time limit in which the Forms can be filed along with Penalty is 300
Days thereafter prosecution will be initiated.

In case of Non Filing of Annul Return & Statement of Account & Solvency for
Consecutive five years the LLP may be wind up.
Foreign LLP

Section 59 of LLP Act, 2008 contain provisions regarding Foreign Limited Liability
Partnership but Central Government has not specified any rules for Foreign Direct
Investment in India through LLP.

Benefit For Foreigners

Invest in India without being present in India.

Brand Reservation.

Less No. of Compliances.

Winding up of LLP
Alike Companies, LLP may be wound up either Voluntary or
by the Order of Tribunal.
 STEPS REQUIRED TO REGISTER LLP
 All the LLP Forms are e-forms which requires digital signatures.
Hence

Step 1 – Digital Signature Certificate :

Partner/Designated partner of LLP/proposed LLP, whose signatures are to be

affixed on the e-forms, has to obtain Digital Signature Certificate (DSC) from
any authorized certifying agency.

 Every LLP must have minimum 2 DPs having DIN. Hence,

Step 2
Obtain Director’s Identification Number. (DIN)
As per rule 2(1)(v) DIN means Identification Number allotted by Central Govt. to
an individual or a nominee of a body corporate who intends to be appointed DP
of LLP.

Any individual intending to become DP should file online application 37For DIN
(Rule 10)
Cont… (Steps required to register LLP)

• Applicant should attach certified copies of identity and address proofs,

Affidavit along with form (scanned copy). In case of foreign national, a
certified copy of Passport should be enclosed.

• DIN is valid for life time.

As per Rule 10(8) Every DP should intimate his consent to become DP to the
LLP in form 9 (within 30 days of admission) and the LLP shall intimate the
same to the Registrar in Form 4 (within 30 days of admission).

 Every LLP must have different name. Hence

Step 3 Reservation of Name (Form 1) (Rule 18(5)

Form-1 for reservation of name shall be filed. Partners shall have to select
name of the proposed LLP (up to 6 choices can be indicated).
Any partner or designated partner in the proposed LLP may submit Form-1
and will append his digital signature and submit the e-form.
Approval of name for Indian LLP is valid for 3 months (fees Rs.200/-).
Approval of name for foreign LLP is valid for 3 years (fees Rs.10,000/-) (Form 25
+ Rule 18(3) 38
An existing entity can object allotment of name (Form 23).
Step 4 (Steps required to register LLP)
Form 2 Incorporation: Document + Statements
After the name is reserved by the Registrar,
“Incorporation Document and Statement” (Form 2)
shall be filled up and filed electronically.

Part A of Form 2 contains following particulars :

(a) Name of LLP
(b) Reg. office address
(c) Details of Partners
(d) Value and mode of contribution
(e) Proposed business, etc.

Part B of Form 2 contains a statement to be signed by a DP and a Professional

engaged by LLP.

A statement in Part B of Form 2 (the e-form) is to be digitally signed by a person

named in the incorporation document as a designated partner having DIN.

Also a statement to be digitally signed by an advocate/company secretary/

chartered accountant/ cost accountant in practice who is engaged in the
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formation of LLP.
 Congratulations! Your LLP is now registered by ROC

Step 5 – Execute LLP Agreement + Stamp

And file Form 3 which is summary of LLP Agreement. As per Rule 21
Form 3 should be filed along with the prescribed fee within 30 days of the date
of Incorporation. (Rule 21).

Forms List
Description E-Forms
Application for reservation or change of name Form1
Incorporation Document and Statement to Incorporation Document and
Subscriber's Statement Form2

Information with regard to Limited Liability Partnership Agreement and

changes, if any, made there in Form3
Notice of appointment, cessation, change in name / address / designation of
a partner / designated partner, intimation of DPIN and consent to become a
partner/designated partner. Form4
Notice for change of name Form5

Application for allotment of Designated Partner Identification Number Now DIN

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Statement of Account & Solvency Form8
Intimation of changes in particulars by Designated Partners Form 10
Annual Return of Limited Liability Partnership Form11
Form for intimating other address for service of documents Form12
Notice of change of place of registered office Form15
Application and statement for the conversion of a firm into Limited Liability
Partnership Form17
Application and Statement for conversion of a private company/unlisted public
company into limited liability partnership. Form18
Notice of intimation of Order of Court/ Tribunal/CLB/Central Government to the
Registrar Form22
Application for direction to LLP to change its name Form23
Application to the Registrar for striking off name Form24
Application for reservation/renewal of name by a foreign LLP/foreign company Form25
Form for registration of particulars by foreign limited liability partnership Form27

Alteration in the - (A) The incorporation document, or other instrument constituting

or defining the constitution of a limited liability partnership incorporated or
registered outside India; or (B) The registered or principal office of a limited liabili Form28

(A) Alteration in the certificate of incorporation or registration of limited liability

partnership incorporated or registered outside India (B) Alteration in the name or 41
address of any of the persons authorized to accept service on behalf of a foreign l Form29
Application for compounding of an offence under the Act Form31
Statements of Accounts and Solvency & Audit (Sec.34)

(i) LLP is required to maintain books of accounts for each year as prescribed by Rule
24. (Sec.34).
(ii) Books of Accounts to be maintained for 8 years from the date on which they are
made.
(iii) Accounts on cash basis or on accrual basis under double entry system of accounting.
(iv) Every designated partner shall have deemed to approve the accounts unless one take
all reasonable steps to prevent their being approved & signed.
(v) Within a period of six months from the end of the year, LLP to prepare a Statement of
A/cs and Solvency in Form No.8 as prescribed by Rule 24.
It is to be signed by the Designated Partner.
(vi) Before 30th October in each year, the Statement of Accounts and Solvency for the
year ended on 31st March is required to be filed with the Registrar ( Rule 24)
(vii) (Sec. 35) Annual Return – Every LLP to file Annual Return within 60 days of closure
of financial year. Incase of failure DP to be fined (Rs.10,000/- to Rs. 100,000/-)
Additional fee of Rs 100/- per day.

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 CONTD….
(viii) Accounts shall be audited by Auditors appointed by the LLP, in accordance with Rule 24.
Audit compulsory under LLP Act if : -
(a) Turnover exceeds Rs. 40 lakhs
(b) Contribution by partners exceed Rs. 25 lakhs.
(ix) Auditor shall be appointed before the end of FY for first year
Subsequent Auditor to be appointed before 30 days of end of FY
(X) Auditor can resign by giving a notice 14 days prior to the last date for the appointment of auditor
along with statement of circumstances connected (Otherwise not effective)
(XI) Auditor’s term comes to end on deposit of notice or date mentioned.
(XII) Annual return needs to be certified by CS if Turnover exceeds 5 crores or contribution exceeds 50
lakhs

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CONVERSION TO LLP (Sec.55 to 57)

Conversion from firm/company into limited liability partnership.

(Section 55 + Schedule-II).

1. Eligibility – A firm can be converted only if all the partners agree to become partners of
LLP.
2. A private company can be converted into LLP only if :
- all shareholders agree to become partners of LLP and
- there is no security interest subsisting like mortgage
(Sec. 56 Schedule-III)
3. Conversion from unlisted public company into LLP. (Section 57 + Schedule –IV)
4. Registrar to issue a certificate in Form No. 19.
5. On Registration of LLP erstwhile firm or company will be deemed to be dissolved.
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(Cont…CONVERSION)

CONVERSION from FIRM to LLP: (As per Second Schedule)

a) On incorporation of LLP all the rights and liabilities under various agreements executed by
the firm shall stand assigned to LLP as if those agreements were executed by LLP instead of
the firm.

b) All the properties of previous firm would vest in LLP without any assurance.

c) If any property of the partnership firm is registered with any authority, LLP must notify the
authorities like SSI etc., about the conversion and submit the particulars in such form as the
authority may specify.

d) For a period of 12 months LLP will have to mention its previous Name and Registration
number and business Form.

• If the Registrar refuses registration, the Applicant may apply to the Tribunal within 60
days from such intimation of refusal [Rule 32(2)].

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• Rule 33 provides that upon such conversion the necessary intimation to the Registrar of
Firms or Registrar of Companies, as the case may be shall be given in form No. 14.