A Formation of Limited Liability Partnership combines the best aspects of a corporation with a partnership. It possesses the traits of both of these types. As the term implies, partners in a corporation have limited liability, which prevents the use of personal assets of the partners to settle obligations owed by the firm. Nowadays, a lot of entrepreneurs are choosing this type of business, making it highly popular. Since there are many partners in the company, none of them are liable or accountable for the wrongdoing of others. Each person is responsible for their own act. The Limited Liability Partnership Act of 2008 regulates all limited liability partnerships. However, LLP was first implemented in India in April 2009. Due to its affordable registration fees and straightforward maintenance requirements, LLP is frequently the first choice of small Indian businesses. In this article, we will thoroughly discuss the Formation of Limited Liability Partnership.

Conditions for the Formation of LLP

• Two or more partners (Individual or body corporate).
• There must be a minimum of two approved persons as partners, one of whom must be an Indian citizen.
• Digital signature certification certificate, LLP Agreement, LLP Name
• Licensed business

Basic Characteristics of LLP

A limited liability partnership has the following characteristics:

• An LLP’s essential characteristic is that it is a distinct legal entity that exists without the participation of the Members.
• Members benefit from the organizational adaptability of a partnership through an LLP agreement.
• Recall that the LLP agreement is a confidential record that needs to be safeguarded from the Members.
• Without at least two “designated” members, an LLP cannot be formed.
• The “trade disclosure” of an LLP is similar to that of a corporation.
• LLPs are subject to the same filing and accounting requirements as corporations.
• Taxes on each LLP member’s individual share of income and earnings must be paid.
• An LLP, like a corporation, may issue bonds with either fixed or variable interest rates.
• A Limited Liability Partnership must register with Companies House.
• Limited liability is an additional benefit for LLP members.

Advantages of Formation of Limited Liability Partnership

Simple to create: The process of creating an LLP is simple. It is not time-consuming and complex as a business’s process. The minimal charge to incorporate an LLP is 500 rupees, and the maximum fee that may be paid is 5600 rupees.

Liability: The LLP’s partners have limited liability, which means they are not required to use their own assets to pay the business’ debts. No spouse is accountable for the bad behavior or wrongdoing of another partner.

Permanent succession: The Limited Liability Partnership’s existence is unaffected by the partner’s death, retirement, or financial insolvency. Only in accordance with the requirements of the 2008 act can the LLP be dissolved.

Company management: The directors of the company oversee and carry out all decisions and other management-related tasks. Compared to the board of directors, shareholders have a very limited amount of influence.

Easy ownership transferability: The LLP can be joined or left at any time with no restrictions. It is easy to join the company as a partner, leave, or transfer ownership to another party.

Taxation: Taxation is a benefit of LLP, yes. Limited liability partnerships are excluded from a number of taxes, including the minimum alternative tax and the tax on dividend distributions. Compared to a firm, a limited liability partnership has a lower tax rate.

Documents Required for Formation of Limited Liability Partnership

The following documents are necessary for Formation of Limited Liability Partnerships for both the office and the directors:

For Directors

• PAN card or passport as identity documentation
• Voter ID, a passport, or a driver’s license as evidence of address
• A recent bank statement, an electricity bill, or documentation of residence
• An image the size of a passport for each director
• The director’s sample signature

For Office

• A legally binding statement of the rental agreement, notarized
• If the property is rented, a no-objection certificate (NOC) must be provided by the owner.
• In the case of owned property, a sale deed or property deed is required.

The registrar will create your memorandum and articles once the paperwork has been correctly filed. They will also provide you with information regarding registration fees and stamp duty^[1]. Additionally, you will get your TAN and PAN cards for your business.

Procedure for the Formation of Limited Liability Partnership

Following are the step for the Formation of Limited Liability Partnership;

• For your limited liability partnership, you must first apply for a digital signature certificate. This is merely an electronic signature to assist you in quickly completing the registration procedure online.
• Additionally, it typically takes two business days after you submit your documents to begin the certification process for digital signatures.
• We then apply for a director application number, or DAN number, following the aforementioned stage, which typically takes one business day.
• Choosing a suitable name for your Limited Liability Partnership is the next step. For instance, the name of the LLP need not be the same as your company name. You are free to select any name that you feel comfortable with.
• These procedures are relatively easy to follow, and you have a good chance of receiving your LLP name.

Conclusion 

It should go without saying that establishing an LLP is a risk-free way to do business. The least expensive and safest type of business is a Limited Liability Partnership, as the name implies. The Formation of Limited Liability Partnership is the best way for a business aspirant to break into the competitive corporate market. So, if you need any assistance with the Formation of Limited Liability Partnership contact Bizadvisor.io.

Read our article:Annual Return Filing for LLP: A Complete Overview