INCORPORATION PROCEDURE FOR LIMITED LIABILTY PARTNERSHIP (LLP)
Limited Liability Partnership is a form of business organization which has been introduced in India by way of LLP Act, 2008. A Limited Liability Partnership combines the benefits of both the Company and Partnership into a single form of organization. That is why most of the entrepreneurs are moving towards this form of organization due to its benefits/characteristics like low cost of Formation, Separate legal entity, less compliances, limited liability of partners, etc.
1. Obtain DIN or DPIN
Every Designated Partner is required to obtain a DIN from the Central Government. If a person already has a DIN, the same can be used for forming LLP. Any person intending to apply for DIN shall have to make an application in Form DIR-3.
In case Form DIR-3 details have not been identified as potential duplicate, Approved DIN shall be generated and if the details have been identified as potential duplicate, Provisional DIN shall be generated. In case, DIR-3 is a potential duplicate, the MCA DIN cell will be examine the e Form DIR-3 and same shall be disposed of within one or two days.
2. Acquire DSC (Digital Signature certificate) of Designated Partner
The online filing of documents of LLP(s) can be done with the use of Digital Signatures by the person authorized to sign the documents. Designated Partner of the proposed LLP has to obtain DSC from any authorized certifying authority. After obtaining the DSC, register the DSC on MCA portal.
3. Application for Name Availability (Form 1)
The name with which LLP is to be incorporated is to be decided. Search facility for name of existing companies/ LLPs is available on MCA portal as the registrar will approve the name applied only if the name is not either undesirable in the opinion of the Central Government or it is not identical with or that which too nearly resembles to the name of any existing company or LLP or body corporate or a trade mark registered or pending registration under the Trade Marks Act, 1999. The promoter or professional shall keep in mind the name availability guidelines to ensure the appropriate name. Six choices are available for the application of name in Form 1.
Registrar will allow one name from the proposed name given in the Form 1 and name will be available for 60 days from the date of approval of name by the Registrar.
4. Filing of Form 2 for Incorporation document and Subscriber’s statement
After the approval of name, we need to file Form 2 for Incorporation document and subscriber’s statement. Attachments of Form 2:-
a. Where the appointed partner is a body corporate, copy of resolution on the letterhead of such body corporate to become a partner in the proposed LLP and a copy of resolution/ authorization of such body corporate also on a letterhead mentioning the name and address of an individual nominated to act as nominee/designated partner on its behalf.
b. Proof of address of registered office of LLP
c. The partners are required to subscribe their names along with signatures to the subscription sheet and also along with their consent to become a partner/ designated partner/ nominee/ nominee & designated partner of the LLP which shall be witnessed by any chartered Accountant/Company Secretary/Advocate in practice
d. In principle approval of regulatory authority, if required
e. Detail of LLP(s) and/ or company(s) in which partner/ designated partner is a director/ partner
5. Draft and file LLP Agreement in Form 3
It is not necessary to have the LLP Agreement drafted and signed after the incorporation. It is beneficial to have LLP Agreement drafted and executed before the incorporation of the LLP to avoid any dispute between the partners as to the terms & conditions of the agreement after the formation of LLP.
Some of the basic clauses of LLP Agreement are:
- Name of LLP
- Object of LLP
- Details of Partners & Designated Partners
- Form of contribution
- Profit Sharing ratio
- Rights & Duties of Partners
- Liability of Partners
- Rules for governing the LLP
After incorporation of LLP, we need to file Form 3 with the LLP agreement as an attachment. Form 3 is required to file within 30 days of the incorporation.
6. Certificate of Incorporation
If the Registrar of Companies is satisfied that all the compliances with respect to the incorporation have been complied, the Registrar of Companies will issue a Certificate of Incorporation as to formation of the LLP. The Certificate of Incorporation issued shall be the conclusive evidence of formation of the LLP.
Author CS Saral Naithani at Fidelity Advisors, Delhi and can be contacted at support@fidelity-advisors.com or naithani.saral@gmail.com
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