A Limited Liability Partnership (LLP) is a partnership in which some or all partners have limited liability. It is governed by the provisions of the Limited Liability Partnership Act, 2008 (“LLP Act” for short). The LLP is viewed as an alternative corporate business vehicle that provides the benefits of limited liability but allows its members the flexibility of organizing their internal structure as a partnership based on a mutually arrived agreement. Unlike general partnership this kind of partnership does not get terminated by the death or insolvency of the limited partners. In fact, the LLP has a perpetual succession and the LLP can continue its existence irrespective of changes in partners. It is capable of entering into contracts and holding property in its own name. A minimum of two partners are required to form a LLP, however, there is no limit on the maximum number of partners. Since LLP contains elements of both ‘a corporate structure’ as well as ‘a partnership firm structure’, it is called a hybrid between a Company and a partnership. Section 5 of the LLP Act provides that any individual or body corporate may be a partner in a LLP. Further, to form a LLP, there has to be a minimum of two partners. However, the upper limit in membership is not fixed. The LLP Act gives an LLP the utmost freedom to manage its own affairs. The partners can decide the way they want to run and manage the LLP, in the form of an LLP Agreement. The LLP Act does not regulate the LLP to a large extent; instead it allows the partners the liberty to manage it as they wish.
Chapter III of the LLP Act provides for the incorporation of the LLP and matters incidental thereto. A LLP is formed pursuant to a “limited liability partnership agreement” which is a written agreement between the partners of the limited liability partnership or between the limited liability partnership and its partners, which determines the mutual rights, and duties of the partners and their rights and duties in relation to that limited liability partnership.
For an LLP to be incorporated, at least two persons must subscribe their name to a document called an incorporation document, which must then be submitted to the Registrar of companies. There is also a requirement of fling a statement in the prescribed form, made by either an Advocate, or a Company Secretary, or a Chartered Accountant or a Cost Accountant in whole time practice in India or by anyone who subscribed his name to the incorporation document that all the requirements under the Act and the rules made thereunder are complied with in respect of the incorporation, along with the incorporation document. The incorporation document must contain information such as the name of the LLP, its proposed business, address of its registered office, the name, address and photographs of the persons who are to be its partners on incorporation/ designated partners of LLP on incorporation and such other information concerning the proposed limited liability partnership as may be prescribed.
Upon receiving the incorporation document the Registrar will retain and register it. Once the documents have been registered, the Registrar will, within a period of fourteen days, register the incorporation document and issue a certificate that the LLP is incorporated by the name specified in the incorporation document. The certificate issued by the Registrar is evidence that all the requirements have been complied with. The LLP can also be incorporated by logging on to the website of Ministry of Corporate Affairs, developed for LLP services, i.e., www.llp.gov.in and filling up Form-2 [“Incorporation Document and Statement”] and payment of the prescribed registration free 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. 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.