A Limited Liability Partnership Requirements (LLP) is an ideal business structure for those seeking to run a venture on a partnership basis. As the name suggests, LLP doesn’t compel the partners to risk their assets to address debts or other fiscal issues. It is as robust as a private limited company and as stable as a partnership firm; making it a formidable hybrid structure.
Choosing this structure will translate to zero ambiguity concerning management and better decision-making. To register such an entity, one must meet the incorporation requirements under the LLP Act 2008. Let’s take a sneak peek into Limited Liability Partnership Requirements and other legalities.
What makes a Limited Liability Partnership a standout business structure?
A Limited liability partnership is often recognized as the hybrid of a partnership firm and a limited company. Formed under a provision of the Act, it imparts a distinct legal identity to the members. This leads to risk diversification and better management.
Unlike a traditional partnership, the registration for an LLP is not optional. This serves as an advantage, particularly in scenerios like winding up, addressing debts, and confronting intricate management affairs. Of course, being incorporated would bring a host of compliances to stay operational.
None of the partners in an LLP are exposed to unlimited liabilities which encourages them to stay committed to the company.
LLP shall stay operational even in the absence of a few members. This is unlike a traditional partnership wherein the departure of any partner, owing to any reason, may lead to the closure of the firm.
Understanding Limited Liability Partnership Requirements
To incorporate LLP, one must fulfill minimum eligibility requirements, which essentially revolve around the following:
Minimum Number of Partners
LLP fosters a partnership-based model helmed collectively by a minimum of 2 partners. These partners can be either an individual or a body corporate. Such partners are obligated to invest a minimum capital as a part of establishment compliance. Individuals dealing with mental health or being undischarged insolvent cannot qualify as a partner.
Minimum Number of Designated Partners
Designated partners are the ones who run the management and are selected by the partners. Presently, at least two designated partners are required to serve an LLP. The maximum number can go as high as 15. Designated Partners should not be minors, regardless of nationality.
A Resident Designated Partner
Although there is no cap on nationality concerning the designated partners, the LLP Act mandates the presence of at least one Indian partner. Such a partner must have spent 180 days in India in the previous FY to qualify as a local partner.
Unique Name of LLP
Choosing a unique name and registering it is another critical compliance in the incorporation journey. The rules concerning name selection and reservation are explicitly cited under the Companies Act, Company Incorporation Rules, the Trademark Act, and the Names & Emblems Act. As a general practice, prefer a legally fit name that is original and non-offensive in every aspect.
Registered Office Address of LLP
The presence of a registered office is vital for LLP incorporation. This place would be used for handling management and business affairs. Besides, it will serve as a source for official correspondence and compliance inspection carried out by relevant authorities. Such facilities shouldn’t be located in other than commercial settings.
Certain amount of Capital
The initial corpus for the establishment, aka capital is necessary for LLP incorporation even if it is not mandatory. Arranging initial capital is a strategic decision that strengthens the partner’s commitment and helps the company withstand fiscal woes.
Primary Business Activity
The LLP’s proposed undertakings are referred to as business affairs or objectives. The LLP must define these objectives, explicitly outlining the business activities it intends to undertake. The Registrar of Companies (RoC) will verify this information for incorporation.
Limited Liability Partnership Requirements Concerning Paperwork
Meeting documentation requirements is pivotal for a successful incorporation journey. The incorporation documents help validate the information cited in the application form. The margin for document error is next to negligible as it can lead to application rejection. Listed below is the general paperwork for LLP incorporation.
KYC Documents of Partners
ROC requires these documents to verify the partner’s identity and address. The KYC documents include the PAN, Aadhaar, photographs, and address proofs such as utility bills or bank statements.
Proof of Registered Office Address
The submission of business place documents such as utility bills is also important. Remember to share the latest bills, not older than 2 months.
No Objection Certificate
The No Objection Certificate is another imperative document that verifies the ownership status of the business place. The owner of the place must issue this document with a proper signature. It must reflect that the owner has allowed the company to run the business affairs at this place.
DSC & DPIN
DSC stands for Digital Signature Certificate, which is essentially used to validate e-documents, including online applications. It is safe and encrypted to withstand document mishandling.
DSC Class 3 is mandatory for general partners, meanwhile, DPIN i.e. Designated Partner Identification Number is vital for designated partners. DSC is granted by agencies recognized by the Ministry of Corporate Affairs. For DPIN, the designated partners should file an online application on the MCA portal.
LLP Agreement
Since LLP is akin to a traditional partnership model on a few grounds, it is required to devise an LLP agreement boasting rules and the partner’s duties. These rules must have the consent of the founding partners and designated partners. It must be filed within 30 days of incorporation.
Conclusion
There are loads of Limited Liability Partnership Requirements that one must confront before leaping into business affairs. LLP incorporation is the first step towards a legally sound business journey, requiring adherence to the above requirements without fail.
