Limited Liability Partnership (LLP)

• Limited Liability Partnerships (LLPs) allow for a partnership structure where each partner’s liabilities are limited to the amount they put into the business.
• Having business partners means spreading the risk, leveraging individual skills and expertise, and establishing a division of labor.
• Limited Liability means that if the partnership fails, then creditors cannot go after a partner’s personal assets or income.
• LLPs are common in professional business like law firms, accounting firms, and wealth managers.

HOW AN LLP WORKS

To understand an LLP, it is best to start with the general partnership. A general partnership is a for-profit entity that is created by a mutual understanding between two or more parties.

This is a very technical way of describing two or more people working together to make money. A general partnership can be quite informal. All it takes is a shared interest, perhaps a written contract (though not necessarily), and a handshake.

Of course, with the informal nature of a general partnership, there is a downside. The most obvious risk is that of legal liability. In a general partnership, all partners share liability for any issue that may arise.

In some professions, however, you need something a little more customized than a partnership with a set structure. Enter the Limited Liability Partnership (LLP). The LLP is a formal structure that requires a written partnership agreement and usually comes with annual reporting requirements, depending on your legal jurisdiction.

As in a general partnership, all partners in an LLP can participate in the management of the partnership. This is an important point because there is another type of partnership a limited partnership in which one partner has all the power and most of the liability and the other partners are silent but have a financial stake. With the shared management of an LLP, the liability is also shared, although, as the name suggests, it is greatly limited.

ADVANTAGES



• Limited Liability: The Liability of each partner is limited to his share as written in the agreement filed at the time of creation of LLP as compared to Partnership Firms which have unlimited liability.
• Low Cost: It has a low cost of formation and is easy to form.
• Lower Risk: The partners are not liable for the acts of each other and can be held liable only for their own acts as compared to Partnerships wherein they can be held liable for the acts of their partners as well.
• Simplified Compliance: Less restrictions and compliance are enforced on a LLP by the government as compared to the restrictions enforced on a company.
• Separate Legal Entity: As a juristic legal person, a LLP can sue in its name and be sued by others. The partners are not liable to be sued for dues against the LLP.
• Flexibility: LLPs provide the partners flexibility in business ownership. Partners have the ability to decide how they will individually contribute to business operations, both financially and physically. Management duties can be divided equally or unequally based on the experience of each partner. Partners who have a financial interest in the company can elect not to have any authority over business decisions but still maintain ownership rights based on their percentage interest in the company.

DOCUMENTS REQUIRED




Information

• Proposed name of Company (atleast 6 name in preference wise).
• Share Capital Amount.
• Object of LLP.
• No. of Designated Partner and Partners.
• Ownership ratio.
• Email Id of all Designated Partner and Partners.
• Mobile No. of all Designated Partner and Partners.

In the case of a foreign national, the following documents must be notarized in front of a Notary Public, and the Certificate of Notary must be authenticated by a Diplomatic or Consular Officer authorised in this capacity:

• Passport (Should be in English, otherwise Translated one).
• Date of Birth Certificate or any Other Proof where applicant’s father’s name is written.
• Utility Bill or Bank Statement as address proof.
• Colour passport size photograph.

Timelines

It takes 10 to 15 working days for the formation of unregistered firm and around 25 to 30 working days for registered partnership firm.

Fees

LLP Registrations start from Rs. 7999/- onwards + GST, but the registration may vary from state to state.