The Limited Liability Partnership (LLP) is governed by Limited Liability Partnership (LLP) Act, 2008 and Limited Liability Partnership Rules, 2009. The LLP Rules, 2009 contains administrative provisions for formation, management, reconstruction and winding up of LLPs. Central Government can make applicable any provision of Companies Act to LLP with suitable modifications by issuing a notification.
The Indian Partnership Act, 1932 shall not be applicable to LLPs.
Key features of LLP Act are as follows:
- LLP shall be a body corporate and a legal entity separate from its partners. It will have perpetual succession like a company;
- There shall not be any upper limit on number of partners in an LLP unlike an ordinary partnership firm where the maximum number of partners can not exceed 20 (10 in case of banking);
- While the LLP will be a separate legal entity, liable to the full extent of its assets, the liability of the partners would be limited to their agreed contribution to the LLP. Further, no partner would be liable on account of independent or unauthorized actions of other partners, thus allowing individual partners to be shielded from joint liability created by another partner’s wrongful business decisions or misconduct;
- The framework of LLP is not restricted to professional services alone. Several business activities can be undertaken using the LLP structure.
- Any existing partnership firm can be converted into LLP by complying with the Provisions of clause 58 and Schedule II of the LLP Act. Form 17 needs to be filed along with Form 2 for such conversion and incorporation of LLP.
- Any existing private company or existing unlisted public company can be converted into LLP by complying with the Provisions of clause 58 and Schedule III and IV of the LLP Act. Form 18 needs to be filed with the registrar along with Form 2 for such conversion.
Steps to Incorporate LLP:
- Name reservation:
This is the first step to incorporate Limited liability partnership (LLP). Applicant has to file eForm 1, for ascertaining availability and reservation of the name of a LLP business.
- Incorporate LLP:
After reserving a name, applicant has to file eForm 2 for incorporating a new Limited Liability Partnership (LLP).
eForm 2 contains the details of LLP proposed to be incorporated, partners’/ designated partners’ details and consent of the partners/ designated partners to act as partners/ designated partners.
- LLP Agreement:
Execution of LLP Agreement is mandatory as per Section 23 of the Act. LLP Agreement is required to be filed with the registrar in eForm 3 within 30 days of incorporation of LLP.