PR ASSOCIATES

FORMATION OF LIMITED LIABILITY PARTNERSHIP

        Limited Liability Partnership  (LLP)  is an alternative corporate business form that gives the benefits of limited liability of a company and the flexibility of a partnership. Since LLP contains elements of both ‘a corporate structure’ as well as ‘a partnership firm structure’ LLP is called a hybrid between a company and a partnership


       Any two or more persons associating for carrying on a lawful business with a view to profit may set up an LLP. The LLP Act does not restrict the benefit of LLP structure to certain classes of professionals only. A minimum of two partners will be required for formation of an LLP. There will not be any limit to the maximum number of partners. A body corporate may be a partner of an LLP. An entity which has objectives like “charitable or other not for profit objectives” would not be able to set up LLP since the essential requirement for setting LLP is ‘carrying on a lawful business with a view to profit’. The LLP Act 2008 allows Foreign Nationals including Foreign Companies & LLPs to incorporate a LLP in India provided at least one designated partner is resident of India. However, the LLP/Partners would have to comply with all relevant Foreign Exchange Laws/ Rules/ Regulations/ Guidelines. Every limited liability partnership shall have either the words “limited liability partnership” or the acronym “LLP” as the last words of its name. Indian Partnership Act, 1932 is not applicable to LLPs.

      LLP form is a form of business model which is organized and operates on the basis of an Agreement and it provides flexibility without imposing  detailed legal and procedural requirements, enables professional/technical expertise and initiative to combine with financial risk taking capacity in an innovative and efficient manner. LLP shall be a body corporate and a legal entity separate from its partners. It will have perpetual succession.  The LLP is a separate legal entity, and is liable to the full extent of its assets but liability of the partners is limited to their agreed contribution in the LLP The LLP can continue its existence irrespective of changes in partners. It is capable of entering into contracts and holding property in its own name. The mutual rights and duties of partners inter se and those of the LLP and its partners shall be governed by the agreement between partners or between the LLP and the partners. This Agreement would be known as “LLP Agreement”. As per provisions of the LLP Act, in the absence of agreement as to any matter, the mutual rights and liabilities shall be as provided for under Schedule I to the Act. Therefore, in case any LLP proposes to exclude provisions/requirements of Schedule I to the Act, it would have to enter into an LLP Agreement, specifically excluding applicability of any or all paragraphs of Schedule I. 
  

        LLP form is a form of business model which is organized and operates on the basis of an Agreement and it provides flexibility without imposing  detailed legal and procedural requirements, enables professional/technical expertise and initiative to combine with financial risk taking capacity in an innovative and efficient manner. LLP shall be a body corporate and a legal entity separate from its partners. It will have perpetual succession.  The LLP is a separate legal entity, and is liable to the full extent of its assets but liability of the partners is limited to their agreed contribution in the LLP The LLP can continue its existence irrespective of changes in partners. It is capable of entering into contracts and holding property in its own name. The mutual rights and duties of partners inter se and those of the LLP and its partners shall be governed by the agreement between partners or between the LLP and the partners. This Agreement would be known as “LLP Agreement”. As per provisions of the LLP Act, in the absence of agreement as to any matter, the mutual rights and liabilities shall be as provided for under Schedule I to the Act. Therefore, in case any LLP proposes to exclude provisions/requirements of Schedule I to the Act, it would have to enter into an LLP Agreement, specifically excluding applicability of any or all paragraphs of Schedule I.
 

        Under “traditional partnership firm”, every partner is liable, jointly with all the other partners and also severally for all acts of the firm done while he is a partner. Under LLP structure, liability of the partner is limited to his agreed contribution.  Further, no partner is liable on account of the independent or un-authorized acts of other partners, thus allowing individual partners to be shielded from joint liability created by another partner’s wrongful acts or misconduct. Mutual rights and duties of the partners within a LLP are governed by an agreement between the partners or between the partners and the LLP as the case may be. The LLP, however, is not relieved of the liability for its other obligations as a separate entity.
 

        A basic difference between an LLP and a joint stock company lies in that the internal governance structure of a company is regulated by statute (i.e. Companies Act, 1956) whereas for an LLP it would be by a contractual agreement between partners. The management-ownership divide inherent in a company is not there in a limited liability partnership.  LLP will have more flexibility as compared to a company. LLP will have lesser compliance requirements as compared to a company.
 

     LLPs shall be registered with the Registrar of Companies (ROC) appointed under the Companies Act, 1956) after following the provisions specified in the LLP Act. Every LLP shall have a registered office. An Incorporation Document subscribed by at least two partners shall have to be filed with the Registrar in a prescribed form. Contents of LLP Agreement, as may be prescribed, shall also be required to be filed with Registrar, online.

We will assist you in forming LLP at a reasonable cost.