LLP – Advantages, Disadvantages and Registration Process

Limited Liability Partnership (or LLP) provides the benefits of limited liability to its members and also allows the flexibility of organizing their internal structure as a partnership based on a mutually arrived agreement.

Advantages of forming a LLP are:

  • Liability of partners is limited to their agreed contribution in the LLP
  • LLP has more flexibility and lesser compliance requirements as compared to a company.
  • Simple registration procedure, no requirement of minimum capital, no restrictions on maximum limit of partners.
  • It is easy to become a partner or leave the LLP or otherwise.
  • It is easier to transfer the ownership in accordance with the terms of the LLP Agreement.
  • As a juristic legal person, an LLP can sue in its name and be sued by others. The partners are not liable to be sued for dues against the LLP.
  • No restriction on limit of the remuneration to be paid to the partners like companies, but the remuneration must be authorized by the LLP agreement and it cannot exceed the limit prescribed under the agreement.
  • No exposure to personal assets of the partners except in case of fraud.

Disadvantages of forming an LLP are:

  • Any act of the partner without the consent of other partners, can bind the LLP.
  • Under some cases, liability may extend to personal assets of the partners.
  •  LLP is not allowed to raise money from Public.
  • Because of the hybrid form of the business, it is required to comply with various rules & regulations and legal formalities.
  • It is very difficult to wind up the business as it is very lengthy and expensive procedure.

Registration process:

  1. Obtain DIN
  2. Obtain DSC
  3. Search for name availability
  4. Filing of Form LLP-1 (Name approval) which requires
    • DIN of Designated Partner.
    • Email Id
    • Occupation
    • State of Register office of Company
    • Objects of LLP
    • Partners Contribution into LLP
    • Name of LLP
    • Significant of Name
    • If Proposed Name is Based on Trade Mark (NOC from the Owner of TM)
    • DSC of Designated Partner
  5. Drafting of LLP agreement
  6. Filing of (Form 2) for Incorporation and Subscription Document

Information Required To Be Mentioned In Form LLP-2

  • Enter the proposed address of the registered office and valid email ID of the LLP.
  • Enter the main division of industrial activity
  • Enter the No. of Designated Partner.
  • Enter the total monetary value of contribution by all the partners/ designated partners of the LLP. Value of contribution cannot be less than the contribution entered at the time of name availability.

Documents Required To Be Attached In Form LLP-2

  • Proof of address of registered office of LLP
  • Subscribers’ sheet including consent
  • Detail of LLP(s) and/ or company(s) in which partner/ designated partner is a director/ partner (if applicable).

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