• How-to

The Limited Liability Partnership (LLP) Act 2008 was published in the official Gazette of India on January 9, 2009. After the rules were notified on April 1, 2009, the first LLP in India was incorporated in the first week of April, 2009.

Features of the LLP Act, 2008
1. The major advantage of an LLP is that it offers a great combination for those looking to start a business. It offers the flexibility of a partnership along with the limited liability protection of a company.

2. The partners in an LLP are shielded from the actions of other partners. The liability of a partner in an LLP is limited only to the extent of his/her contribution in the LLP.

3. An LLP is not in any way controlled or affected by the Indian Partnership Act. In fact, an LLP is registered and the legal process is controlled by the Registrar of Companies (RoC). The only exception is that as regards taxation, an LLP is treated like a partnership firm.

4. An existing partnership firm, company or unlisted public company can be converted into an LLP by following the procedure laid down under the Act.

Concept of a Designated Partner
From the description above, it is clear that the partners in a LLP have their liability limited to the extent of their contribution to the venture. However, it was felt that there should be two special partners among the partners in the LLP for two reasons:

1. To be responsible for all actions and things which the LLP has to do to comply with the provisions of this Act.

2. There was a need for a partner who would be liable for all penalties imposed for the contravention of the provisions of the Act.

The partner who performs this function is called the Designated Partner of the LLP. In order to become a Designated Partner, an individual has to give his consent to the LLP and has to obtain a DPIN (Designated Partner Identification Number).

The LLP Act requires that at least two designated partners be present in every LLP. Additionally, these two designated partners have to be individuals (as opposed to a company) and at least one of the designated partners has to be a resident of India.
Section 10 of the Limited Liability Partnership Act states that any LLP not appointing two designated partners can be punished, along with every partner in the firm, with a fine of no less than Rs.2,000 and going up to Rs.5 lakh. If at any given point there cannot be two designated partners for any reason or if no Designated Partner is appointed when a vacancy arises, every partner becomes a Designated Partner.

Major duties of a Designated Partner
1.  To notify any changes in the LLP to the RoC
2. To produce for inspection all the books and papers of the LLP
3. To sign all the e-forms filed with RoC

How do I register my LLP?
The Ministry of Corporate Affairs has made the process of registering an LLP mostly possible online. A step-by-step process is available on the LLP portal of the Government of India (llp.gov.in).

Digital Signature Certificate
Partner/Designated Partners, whose signatures are to be affixed on the e-forms, have to obtain class 2 or class 3 Digital Signature Certificate (DSC) from any authorized certifying agency.

Reservation of name
Log on to the LLP portal to follow the steps to reserve a name for your LLP. Check status of your application by logging on the portal.

Incorporation of LLP
Once the name is reserved by the Registrar, log on to the portal and fill up Form-2 “Incorporation Document and Statement.’
Statement in the e-form is to be digitally signed by a person named in the incorporation document as a designated partner having permanent DPIN and also to be digitally signed by an advocate/company secretary/chartered accountant/cost accountant in practice and engaged in the formation of LLP.
On submission of complete documents the Registrar, after satisfying himself about compliance with relevant provisions of the LLP Act, will register the LLP within a maximum of 14 days of filing of Form-2 and will issue a certificate of incorporation in Form-16.

Filing of LLP agreement and partners’ details
Form 3 (information with regard to LLP agreement and changes, if any made therein) and Form 4 (Notice of Appointment of Partner/Designate Partner, his consent etc.) may be filed with the prescribed fee simultaneously at the time of filing Form 2 or within 30 days of the date of incorporation or within 30 days of such subsequent changes.

©Entrepreneur May 2011

Hrishikesh Datar is the CEO of vakilsearch.com.

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act, designated partner, didgital signature, DPIN, Hrishikesh Datar, Indian Partnership act, Limited liability partnership, LLP, register, Registrar of Companies