LIMITED LIABILITY

PARTENERSHIP
A NEW CORPORATE FORM UNDER THE
LIMITED LIABILITY PARTERNERSHIP ACT-2008
(Effective from7th January 2009)

CA. Vijay R Kalani

[Link], ACA, LCS, ICWAI (Final)

CA. Vijay R Kalani

 Limited Liability Partnership
 Governing law : Limited Liability Partnership
Act, 2008 and various rules
made there under.
 Registration : Compulsory.
 Creation : Created by law.

CA. Vijay R Kalani

Nature of Limited Liability Partnership

 A body corporate formed and incorporated under the LLP Act,2008.

 A legal entity separate from its partner.
 It will have perpetual succession.
 Any change in the partners of a LLP shall not effect its existence,
right, or liabilities.
 LLP can also purchase movable/immovable property in it’s own
name.
 Save as otherwise provided, the provision of Indian Partnership Act
1932, will not be applicable to a LLP.
 Liability of the every partner limited except in case of fraud.
 It have hybrid characteristics of company & firm.
 No maximum limit of the partners.

CA. Vijay R Kalani

 Why is LLP required to business community

► It is a new corporate form that enable professional expertise and

entrepreneurial initiative to combine, organize and operate in an innovative
and efficient manner.
► It provides flexibility suited to the requirements of service, knowledge and
technology based enterprises.
► It will not impose detailed legal and procedural requirement as needed in case
of companies.
► The structure of LLP does not restrict the benefits of LLP structure for a certain
class of professional only and would be available for use by any enterprises
which fulfill the requirement of LLP Act.
► Allowing individual partner to be shielded from joint liability created by
another partner’s wrongful business decision or misconduct.
► Provision have been made in the Act for corporate actions like merger,
amalgamations etc.
► LLP Act and their rules also made for winding up and dissolutions of LLP
(unlike partnership firm)

CA. Vijay R Kalani

 Significant Difference between LLP & Firm

1. Partnership is not a legal entity separate from its partners, while LLP is a
legal entity separate from its partners.

2. Firm is governed under Indian Partnership Act 1932, while LLP is

governed under Limited Liability Partnership Act 2008.

3. Liability of the partner is unlimited under Indian Partnership Act while in

the case of LLP , the liability of the partner is limited to the extent of their
capital contribution/ commitment.

4. A partnership firm does not have perpetual succession but in the LLP act
2008, A LLP has perpetual succession.

5. In case of partnership the property of the firm belongs to partners who

are collectively entitled to it but in case of an LLP the property belongs to
the LLP and not to the partners individually.

Maximum no. of partners are specified under the Indian Partnership Act,
1932 but there are no bar for maximum no. of partners under Limited
Liability Partnership Act 2008. CA. Vijay R Kalani
 Distinction between Company and LLP

Memorandum and Article of Association is required in case of company under

Companies Act,1956. while in case of LLP, only partnership agreement is required.

The members are not agents of the company, in LLP the partner is an agent of the
LLP.

There are less complicated procedure regarding Audit of accounts in LLP in

comparison with company.

A company must have a common seal but in case of LLP it’s optional.

Disclosures are required where directors are interested in any contracts in case of
company , No requirement of disclosure in contracts where partners are interested,
unless specified in LLP agreement.

Minimum paid up capital of Rs.1 lac for incorporation of Pvt. Co. and Rs. 5 lacs for
incorporation of Public company is required, but no such requirement of minimum
capital in Limited Liability partnership.

CA. Vijay R Kalani

 How to create a LLP
A minimum of 2 partners will be required for making a LLP.

Appointment of at least two “Designated Partner”. Designated

partner shall also be accountable for all regulatory and legal
compliances, besides their liability as partner, per-se.

An Incorporation Document which is subscribed by those two

partners shall have delivered to the Registrar of Limited
Liability Partnership (ROLLP). Every LLP shall have a
registered office and Contents of LLP agreement, as may be, shall
also be required to be filed with ROLLP at the filing of LLP
incorporation document.
A copy of address proof of the premises proposed to be the
Registered Office of LLP alongwith NOC from the owner of the
premises shall be required.
Every LLP shall be suffix the word “Limited Liability Partnership” or
the acronym “LLP” as the last word of its name.

CA. Vijay R Kalani

What is LLP Agreement?

The mutual rights and duties of partners inter se and those

of the LLP and its partner 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 the provisions of the LLP Act, in absence of
any LLP agreement ,the mutual rights and duties shall be
as provided for under Schedule I of the Act. Therefore, in
case any LLP propose to exclude provisions/requirement
of Schedule I to the Act, it would have to enter into an
LLP Agreement, specifically excluding applicability of any
or all paragraph of Schedule I

CA. Vijay R Kalani

Procedure to be followed for to start the LLP.

Acquire Designated Partner Identification No.

Register DPIN, DSC
AND Check Name Availability
With LLP
Acquire Digital certificate

Download Track Status Receive Certificate from

File Electronically
LLP Forms ROC

Limited Liability Partner Able to Function

CA. Vijay R Kalani

 “DESIGNATED PARTNER”
Every LLP have at least two Designated partners who are individual
and at least one of them shall be a resident in India.

Every designated partner of a LLP will obtain a Designated Partner

Identification Number (DPIN) from Central Government. In form no.-
7 of LLP act 2008.

Prior consent of designated partner is required for his appointment

as designated partner.

LLP will be required to appoint a designated partner within 30 days

of a vacancy, if any.

CA. Vijay R Kalani

 Method of acquiring Designated Partner’s Identification
Number (DPIN).

Every individual or nominee of a body corporate shall make a application electronically in

Form 7 to the Central Government for obtaining Designated Partner’s Identification
Number (DPIN).
Following process shall be follow to obtain the DPIN :-
► Login website of Ministry of Corporate Affairs.
► The applicant shall access the Form 7 from the portal, fill-in the required particulars and submit the form
electronically.
► A provisional DPIN generated online by the applicant will remain valid for a period of 60 days from the date
on which it was generated.
► The applicant shall after the allotment of provisional DPIN submit an application to the ROL. along with
prescribed fee for allotment of the regular DPIN within 60 days form the date on which the provisional DPIN
was generated on line.
► The applicant shall attach his photograph and proof of identity which shall be certified by any one of the
appropriate prescribed authority. (Gazetted officer of Central Government or State government or, Notary
Public or CA, CWA, CS having certificate of practice)
► DPIN allotment or rejection shall be communicated to the applicant within a period of one month from the
receipt of such application.

CA. Vijay R Kalani

 Financial disclosure and audit requirement

1. The Limited Liability Partnership will be required to maintain such

proper books of accounts as may be prescribed relating to its affairs for
each year of its existence according to prescribed accounting principles
and shall maintain the same at its registered office for such period as
may be prescribed.
2. Every LLP shall be required to prepare a Statement of Account and
Solvency within a period of 6 months from the closure of each financial
year, and the same shall be signed by the designated partners and will
be filed to the ROCLLP within prescribed time and fee.
3. The accounts to be audited annually in case LLP’s having turnover
more than Rs.40 lacs or contribution exceeds Rs. 25 lacs in any
financial year.
4. Every LLP will be required to file an annual return duly authenticated
with the registrar within 60 days of the closure of its financial year in
prescribed manner and fee.

CA. Vijay R Kalani

Conversion of other Entities into LLPs And vice versa

The LLP Act contain enabling provision pursuant to which a Firm,

Private company or unlisted public company would be able to
convert themselves into LLPs. Provision of clause 58 and
Schedule II to Schedule IV to the Act provide procedure in this
regard.
LLP would not be allowed to convert itself into company under
LLP Act. However, enabling provisions would be required to be
made in the Companies Act for such conversion. Necessary action
in this regard would be taken when Companies Act would be
revised.

CA. Vijay R Kalani

 Winding Up And Dissolution
Winding up of LLP may be either voluntary or by the order the
National Company Law Tribunal(NCLT) and LLP so wind up
may be dissolved. In the following circumstances, LLP may be
wound up by Tribunal:-

 If LLP SO DECIDES that it should be wound up by Tribunal.

 If the number of PARTNERS IS REDUCED below than 2 and
LLP carries its business more than 6 months.
 If LLP is UNABLE TO PAY ITS DEBTS.
 If LLP has made default in filing Statement of Account and
Solvency Or Annual Return for any continuous FIVE financial
years.
 If LLP has acted AGAINST THE INTEREST of sovereignty and
integrity of India.
 If the opinion of Tribunal is that its JUST & EQUITQBLE that
LLP should be wound up.

CA. Vijay R Kalani