Unit 3

The Limited Liability Partnership

Act,2008
Meaning
 A limited liability partnership (LLP) is a
partnership in which some or all partners
(depending on the jurisdiction) have limited
liabilities. It therefore can exhibit elements
of partnerships and corporations.
 In an LLP, each partner is not responsible or

liable for another partner's misconduct or

negligence. This is an important difference
from the traditional partnership
Nature/Features of LLP
 They are a separate legal entity from their Members.
 They have the benefit of limited liability for their
Members.
 They are taxed as a partnership.
 They have the organizational flexibility of a partnership.
 Any agreement (“LLP agreement”) between the Members
governing the operation of the LLP is a private
document which is confidential to the Members.
 They must have at least two “designated” Members.
 Their “trading disclosure” requirements are similar to
those of a company.
 They must be registered at Companies House.
 Their accounting and filing requirements are similar to
those of a company.
Difference between LLP and Partnership
Particular Limited Liability Partnership
Partnership
Registration under Act  It is registered under It is registered under
LLP Act,  2008  Partnership Act, 1932

Registered to LLP registration is Partnership

done with to Ministry registration is done with
of Corporate  Affairs. to Registrar of firms.
Liability Since the partner and Since the partner and
the firm is considered the firm is not
as a separate legal considered as a separate
entity. Hence, the legal entity. Hence,
liability of the partners Partners  are personally
is limited to the liable for the  unlimited
amount invested in the amount of liabilities  of
Difference(Continue..)
A number of partners •Minimum 2 and no •Minimum 2 and
and requirements upper limit for maximum 100
maximum number of partners can be the
partners in LLP. member of
• No minor can be the partnership firm.
partner •Minor can be a
partner.

Agreement between LLP Partnership Deed

partners Agreement governs governs the operation,
the operation, management and
management and decision-making
decision-making methodologies and
 methodologies and other activities of the
other activities of the partnership.
Difference between LLP and Company
 A limited company can be registered, owned and managed by just
one individual – a sole person can act as both the director and
shareholder (or guarantor). A minimum of two members are
required to set up an LLP. However, one way around this is to set up
a dormant limited company as the second LLP member.
 The liability of company shareholders or guarantors is limited to the

amount paid or unpaid on their shares, or the amount of their

guarantees. The liability of LLP members is limited to the amount
each member guarantees to pay if the business runs into financial
difficulty or is wound up.
 A limited company can receive loans and capital investment from

outside investors. An LLP can only receive loan capital. It cannot

offer equity shares in the business to non-LLP members.
 It is easier to change the internal management structure and

distribution of profits in an LLP.

 A limited company can be operated as a non-profit business. An LLP

must be set up with the intention of making a profit.

LLP Agreement
 A limited liability partnership agreement is a contract made
between the members of an LLP to establish a fair
relationship between them and to protect their investment.
The LLP itself is typically also a party to the agreement.
 The agreement will (amongst other things):

1. set-out the rights and obligations of the members;

2. regulate the members' investment (capital) in the
business;
3. regulate property used and owned by the LLP;
4. set-out how profits or losses will be shared;
5. set-out how the LLP is going to be run; and
6. regulate how important decisions are to be made.
Partner and Designated Partner
 Partner and designated partner in a LLP both are responsible for all
acts, matters and things required to be done in a limited liability
partnership (LLP). The duties of designated partners in a Limited
Liability Partnership (LLP) are same as that of partners. Also they
perform the same role as that of a director performs in a Company.
They are governed by mutual rights and duties as provided in the LLP
agreement. But there lies some disparities in the definition and
functions of partners and designated partners in LLP and these are as
follows –
 1.Partner is a generic term used to represent partners in case of
General Partnerships while Designated Partner is a term used in case
of Limited Liability Partnerships.
 2.The duties, rights and liabilities of a partner are generally laid
down in a partnership deed where as in case of a designated partner;
his duties, rights and liabilities are mentioned in the LLP Agreement.
 3.The liability of a partner to third parties is unlimited and extends to
his personal property where as the liability of a designated partner is
only up to the capital introduced by them or as provided in the LLP
Agreement.
 Partner and Designated Partner
(continue..)
 4.The Designated Partners are solely responsible for the
management and the execution of all the acts and things
required to be carried out by the LLP including compliance of
the provisions such as filing of documents/returns/statements
as required by the LLP Act. On the contrary, partners in a LLP
are not responsible for any such acts and are only required to
make contribution in the LLP.
 5.The extent of liability on the partners and the designated
partners for penalties imposed for any contravention of the
provisions shall be governed by the Partnership Deed and the
LLP Agreement respectively.
Incorporation by Registration
 User Registration.
 Obtain Designated Partners Identification

Number (DPIN).
 Digital Signature Certificate.
 Reservation of name.
 Incorporation of LLP.
 Filing of LLP agreement (Form-3) and

Partners’ details (Form-4).

User Registration
• Register yourself on the website of Ministry of
Corporate Affairs, developed for LLP services, i.e.
www.llp.gov.in . This website may also be accessed
through the website of the ministry www.mca.gov.in
On the home page of the URL www.llp.gov.in click
“Register” tab on top right hand corner of the page.
• Fill in the registration form. Fields marked * in the
form are to be mandatorily filled. Select your user
name and password.
• Upload digital signature certificate.
• On successful registration, system will give a
message that you have been registered successfully.
Obtain Designated Partners
Identification Number (DPIN)
 All designated partners of the proposed LLP
shall obtain “Designated Partner Identification
Number (DPIN) / Director Identification
Number (DIN)”.
 • DPIN/DIN may be applied from:

http://www.mca.gov.in/MCA21/ Din.html
Digital Signature Certificate
 Partner/Designated partner of LLP/proposed
LLP, whose signatures are to be affixed on
the e-forms has to obtain class 2 or class 3
Digital Signature Certificate (DSC) from any
authorized certifying agency, details of which
are available on the home page of the LLP
portal under the tab “Certifying Authorities”.
Reservation of name
 Log on to the LLP portal by clicking the “log in” tab on the top
right corner of the homepage and enter your username and
password. After login, click “E-Forms” link.
 • Open Form-1 for reservation of name and fill in the details.

Select name of the proposed LLP (upto 6 choices can be

indicated).
 • Any partner or designated partner in the proposed LLP may

submit Form-1.
 • Append digital signatures and submit the e-form
 • Pay the necessary fee by credit card (master/visa).
 • Free name search facility (of existing companies / LLPs) is

available on MCA portal (hyper link available on LLP portal).The

system will provide the list of similar/closely resembling names
of existing companies/LLPs based on the search criteria filled up.
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”.
 • Pay the prescribed registration fee as per the slab given in

Annexure A of the LLP Rules, 2009, based on the total monetary

value of contribution of partners in the proposed LLP.
 • 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, maximum within 14 days of
filing of Form-2 and will issue a certificate of incorporation in
Form-16.
 • You can check status of your application by logging on to the

portal.
Filing of LLP agreement (Form-3) and
Partners’ details (Form-4)
 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.
Registered office and change therein
 All LLP’s is mandatory should have a registered office
address for the purpose of receiving all the
communication/notices from the registrar of LLP, Central
or State Government, Income-tax Department or other
authorities.
 This is the address which is registered by the ROC in their
records as the registered office of the LLP.
 Though LLP can have numerous offices throughout India,
it will have only one address marked as registered
address of the LLP & the same will be reported &
registered with the registrar of LLP.
 Any modifications in the registered address of LLP will be
updated with the registrar.
Registered office(Continue..)
 LLP can change its registered address by
following due process of law which is normally
prescribed in the LLP agreement & in case the
agreement is silent on any point then, in that
case, the LLP Act may be referred to:
1. Change of registered office address of LLP
within the jurisdiction of ROC.
2. Change of registered office from the jurisdiction
one registrar to other within the same state.
3. Change of registered office from one state to
another state.
Change of Address within Same ROC
 The registered address of the Limited Liability Partnership can be modified by the
partners, from one city to another or from one address to another address within the
jurisdiction of same ROC within the same state, for such purpose below mentioned
steps will be required:
 Holding of meeting of all partners & passing a resolution for change of Address of LLP
with the majority or as defined under LLP agreement.
 In the same meeting, one designated partner shall be authorized to file a necessary
application for change of Registered address with the registrar & to do any other
matter related thereof.
 Intimate the registrar of LLP about a change of Registered Address within 30 days of a
decision by the partners by filing Form 15 with prescribed fee to the registrar of LLP.
 Form 15 approval will be informed by ROC to the applicant by mail & then the master
data of the LLP will start reflecting the new address.
 ROC will not issue any fresh Certificate towards the change of Address.
 Resolution copy approved by the partners, premises proof & a no objection certificate
(NOC) from the owner of the premises will also be filed along with Form 15.
 Subsequent to change of address, the LLP shall also make changes in all its stationery,
letterhead, Invoices, Bill Books, display boards, etc.
 The same will be updated in all registration & licenses available by the LLP, Income Tax
records by amending PAN and TAN once, the modification of address of LLP is
completed.
Change of Address from one Jurisdiction of
ROC to another ROC within the same State

 For Transfer of registered office from the

Jurisdiction of one ROC to another no consent
is required from the secured creditors, there
is no need to publish any public notice as
such. The same procedure shall be adopted
by filing form 15 within 30 days of a decision
by the partners of LLP. A further change in
LLP agreement shall take place as a normal
practice.
Change of Address from one state
ROC to another State ROC
 Partners will meet & analysis the list of secured creditors.
Consent from all such creditors shall be obtained for the shifting
of registered office from one state to another.
 Newspaper Notice shall be published in two newspapers, one in

English language newspaper & another is the principal/ primary

language of the state where ROC is situated, Notice must be
published prior to 21 days of filing the intimation to ROC.
 Within thirty days of such notice, the LLP will file, form 15 will be

filed to the ROC intimating ROC with the subsequent attachments

after the expiry of 21 days of public notice:-
1. Consent letter of the auditors (secured)
2. List of secured creditors.
3. Copy of resolution passed by LLP with the majority approving
such change of address from one state to another state.
4. Consent of all partners.
5. Proof of the new registered Address.
6. NOC from the Owner of the premises.
Process of Change in Name of LLP
 Before commencing the LLP name change process, decide on a name
and verify the LLP name availability. If the name is available, then an
application for Reservation of Unique Name (RUN) can be made on
the MCA portal to reserve the name for a period of 20 days.
 Along with the name application, the following documents can be

attached:
1. Certified copy related to the consent of Partners to make an
application for fresh name.
2. Certified copy related to your the Limited Liability Partnership
otherwise LLP Agreement
3. Trademark application otherwise registration certificate photocopy,
if some
4. Ensure that the consent letter appended to the e-form also permit
one of the partners to file it with Ministry of Corporate Affairs
(MCA).
Partners and their relations
 1. Save as otherwise provided by this Act, the mutual rights and duties
of the partners of a limited liability partnership, and the mutual rights
and duties of a limited liability partnership and its partners, shall be
governed by the limited liability partnership agreement between the
partners, or between the limited liability partnership and its partners.
 2.The limited liability partnership agreement and any changes, if any,
made therein shall be filed with the Registrar in such form, manner
and accompanied by such fees as may be prescribed.
 3. An agreement in writing made before the incorporation of a limited
liability partnership between the persons who subscribe their names to
the incorporation document may impose obligations on the limited
liability partnership, provided such agreement is ratified by all the
partners after the incorporation of the limited liability partnership.
 4.In the absence of agreement as to any matter, the mutual rights and
duties of the partners and the mutual rights and duties of the limited
liability partnership and the partners shall be determined by the
provisions relating to that matter as are set- out in the First Schedule.
Limitation of Liability Of LLP
  limitation of the liabilities incurred by the
partners or the LLP as a whole. They can be
classified as below:
1. Liability of person not authorised to act.
2. Liability of LLP if partner has incurred
liability due to wrongful act or omission.
3. Obligations of LLP as an entity.
4. Discharge of liability of LLP.
Liability of Person not Authorised to Act

 Section 27(1)(a) provides that LLP is not bound by anything done

by a partner in his dealings with a person if the partner, in fact,
has no authority to do so, and the person, he is dealing with
knows that he has no authority to act so or does not know him to
be a partner. This somewhat curtails the open authority given to
the partners under section 26. It is important that no form of
authority- express or implied is conferred upon the partner in
relation to that act. If the LLP removes itself from the liability to
be incurred, it will obviously have to be discharged by the partner
in his individual capacity. The conditions to be satisfied for the
LLP to be absolved of all liability are:
 The partner has not been conferred the authority with respect to
his dealings with a person.
 The person is aware of the partner’s lack of authority.
 The person has no knowledge or does not believe the partner’s
association with the LLP.
Liability of LLP if Partner has Incurred Liability due to Wrongful Act or Omission

 Section 27(2) holds the partners and the LLP responsible

if the partners incur liability of a third person by his
wrongful act or omission in course of the business and
in exercise of his authority. This section clearly derives
its substance from Section 26 of the Indian Partnership
Act which also holds the firm liable for the partner’s
misconduct. The liability, however, remains
concentrated to the LLP as a whole and the erring
partner and does not attach itself to other partners
individually. The aggrieved party may proceed in a suit
against the partner and the LLP, holding them jointly
and severally liable, but may not proceed against them
singly.
Obligation of LLP as a Whole

 Section 27(3) provides that any liability incurred

by the LLP shall be its liability as a whole and shall
not confer individually upon the partners. The LLP
being an independent body corporate is eligible to
enter into contracts and if such contract is
vitiated, the liability rests on the LLP as a whole
acting through its agents, partners etc. For
instance, if the obligation is of a pecuniary nature
it has to be met by the assets of the LLP and not
the individual assets of the partners.
Discharge of LLP’s liabilities

 Section 27(4) provides that the liabilities of an

LLP shall be discharged from the LLP’s assets
alone. This is an extension of section 27(3)
which separates the liability of the LLP from
that of the partners. Since an LLP is an
independent entity, the liabilities incurred by
it in such capacity shall be discharged from
the assets of the LLP alone.
Whistleblowing

 Whistleblowing is the act of drawing public

attention, or the attention of an authority
figure, to perceived wrongdoing, misconduct,
unethical activity within public, private or
third-sector organisations.
 Corruption, fraud, bullying, health and safety

violation, cover-ups and discrimination are

common activities highlighted by
whistleblowers.
Contribution
 Partner's contribution may consist of both
tangible and/or intangible property and any
other benefit to the LLP. The monetary value
of contribution of each partner shall be
accounted for and disclosed in the accounts
of the limited liability partnership in the
manner as may be prescribed in the rules.
Financial Disclosures
 Under the LLP Regulations, the members are
responsible for ensuring that adequate
accounting records are kept
which disclose with reasonable accuracy at
any time the financial position of the Group
and which enable them to ensure that
the financial statements will comply with
those regulations.
Annual Return
 Annual Returns or you can say Form 11 is a
Summary of LLP's Partners like whether there are any
changes in the management of the LLP. Every LLP is
required to file Annual Return in Form 11 to the
Registrar within 60 days from the closure of financial
year i.e the Annual Returns has to be filed on
or before 30th May every year. i.e 30-05-2018 is the
last date for filing annual Returns this year.
 Note -Form 11 or Annual Return is Applicable on
those LLP which is registered until the 30-09-2017.
if you LLP is registered after the 01-10-2017 then
you have to file LLP Annual Returns in the year 2019.
Taxation of LLP
 The LLP taxation policy is similar to that of
a Partnership firm. From assessment year
1993-94, a partnership firm is treated as a
separate taxable entity and has to pay tax on
its income. Income of a partnership firm is
taxed at 30% plus 2% education cess plus 1%
secondary and higher education cess – similar
to a private limited company.
Conversion of LLP
 Several businesses started in India as Limited Liability Partnership
(LLP), may now wish to convert into a private limited company for
more growth in business or for infusing equity capital. An LLP can be
converted into a Pvt. Ltd. company as per the provisions contained in
Section 366 of the Companies Act, 2013 and Company (Authorised to
Register) Rules, 2014.
 However, there are various requirements which need to be satisfied

for converting an LLP into a Private Limited Company, for instance,

an LLP must have at least 7 partners, approval from all the partners is
required, advertisement in newspaper is to be done in a local and a
national newspaper, a No Objection Certificate (NOC) is required
from the ROC where such LLP is registered and then all the
incorporation process has to be undertaken which includes:
1. Approval of name

2. Securing DSC and DIN

3. Filing form no. URC – 1

4. Memorandum of Association & Articles of Association

Winding Up
 Winding up is the method of ending, or
dissolving, a business. The winding up
activity includes selling all assets, paying off
creditors, and distributing remaining assets
to the partners or shareholders. Winding up
can refer to dissolving either a corporation or
a partnership.
Dissolution
 The Dissolution of a company may take place in two ways.
First in which the company is transferred to another
company under the scheme of reconstruction or
amalgamation. In such a case, the transfer of company will
be dissolved by an order of Tribunal without it being wound
up.
 In second scenario, the company shall undergo winding up
process where the assets of the company shall be realized
and proceeds shall be used to pay its liabilities. Once the
debts have been settles, the remaining amount, if any, shall
be distributed amongst the stakeholders and Tribunal shall
pass the order of dissolution of the company and strike its
name off the register of Registrar of the Companies.