A visit to new Limited Liability Partnership – LLP Incorporation Procedure

A visit to new Limited Liability Partnership (LLP) Incorporation Procedure

An LLP is one of the most famous type of entity after company. After a break in LLP registrations due to up gradation in existing system, the Government recently announced a new procedure akin to a company’s formation by enforcing Limited Liability Partnership (Second Amendment) Rules, 2018 w.e.f 2nd October, 2018 and making changes in Limited Liability Partnership Rules, 2009 (LLP Rules). The new online LLP registration process involves name service through LLP-RUN, Incorporation form FiLLiP, change in authority, etc. This article is a wholesome visit to the new LLP registration process.

1. Introduction

An LLP is a corporate structure which integrates benefits of limited corporations and the traditional partnership firms. On one side, LLP structure allows the benefit of limited liability and on another side, it provides the flexibility for internal management of business. These features along with easy maintenance and least regulatory compliances make an LLP a preferred form of business organisation for many professionals, service providers and small and medium businesses in India.

Over the last few years, India is facilitating start up activities for promoting entrepreneurship and the Government took various initiatives such as Make in India, Standup India and Start-up India, Ease of doing business in India etc. For ease of doing business in India, the Government has announced reductions in fees and relaxation in taxes, etc. In this series, Ministry of Corporate affairs (MCA) in early 2018 re-engineered the company registration process including reduction in government fees for company registration and few more procedural changes. And now, the MCA has lifted the bar imposed on incorporation of an LLP due to non-allotment of new DPINs to proposed designated partners. The new LLP can be registered through a new online LLP registration process effective from 2nd October, 2018.

2. Statutory Requirement

As per section 6 of Limited Liability Partnership Act, 2008 (hereinafter referred to as LLP Act), two or more persons are required to form an LLP. Such persons are associated for carrying on a lawful business with a view to earning profit. Among the partners, there should be minimum two designated partners who shall be individuals, and at least one of them should be resident in India as required under section 7 of LLP Act, 2008.

•  Digital Signature Certificate (DSC)

Before initiating incorporation process for an LLP, it is advisable to obtain digital signature certificate (DSC) for the proposed designated partners of an LLP so as to enable them to digitally sign and file e-forms. DSC can be either class 2 or class 3 category of DSC.

• Name reservation, Integrated form FiLLiP and Limited Liability Partnership Agreement

 After obtaining DSC, the next thing to be done is applying and reserving name for an LLP through LLP-RUN. Thereafter, an integrated form for incorporation in FiLLiP is to be filed which allow reservation of name, application for allotment of new DPIN for two proposed designated partners and incorporation application for registration of new LLP. The details of proposed partners and proposed designated partners are required to be filed in Form-4. The Registrar, Central Registration Centre (CRC), on being satisfied that compliance with various requirements have been made, registers an LLP and issues a certificate of incorporation in Form 16 mentioning the Limited Liability Partnership Identification Number (LLPIN). Thereafter, a LLP agreement is required to be prepared and submitted in Form 3 within 30 days from the date of Incorporation of an LLP.

3. Comparison of new LLP incorporation procedure to old procedure

4. Filing of incorporation forms for LLP under the new process

LLP RUN (Reserve Unique Name)

 (1) LLP RUN deals with reservation of name of an LLP.

(2) An applicant can propose two names.

(3) The proposed names should not be undesirable as per section 15(2) of LLP Act and rule 18 of LLP Rules.

(4) An applicant needs to mention the proposed objects and other relevant details in comments section.

(5) After furnishing relevant details, a fee of ₹200 needs to be paid.

(6) On the basis of information filed, the Registrar, CRC may reserve the name for a period of three months from the date of intimation by Registrar, CRC.

(7) One resubmission is allowed and the time limit for the same is 15 days from the date of intimation by the Registrar, CRC.

(8) Where an applicant has not reserved the name through RUN-LLP, he/she may reserve the same directly through incorporation form i.e. Form FiLLiP.

(9) DPIN//DSC is no more a pre-requisite for name reservation through LLP RUN.

FiLLiP- Integrated Incorporation Form

 (1) FiLLiP deals with the single application for reservation of name, incorporation of a new LLP and/or application for allotment of DIN/DPIN.

(2) Where an applicant has not reserved the name through LLP RUN, he may reserve the same directly through incorporation form i.e. Form FiLLiP.

(3) Where an applicant has reserve the name through LLP RUN, it is necessary to quote Service Request Number generated while furnishing LLP RUN.

(4) FiLLiP contain two parts. Part A relates to incorporation and Part B relates to statement by subscribers. It also contain a statement by a professional relating to his/her engagement for formation of an LLP and compliance of all formalities/requirements under LLP Act and LLP Rules.

(5) It is to be noted that application for allotment of DPIN can be made only for two proposed designated partners through FiLLiP.

(6) Consent to act as partner/designated partner is also required to be filed with FiLLiP.

(7) FiLLiP should be filed within 3 months from the date of intimation of name approval.

(8) Fees to be paid along with FiLLiP is as follows:

(9) Following attachments in PDF format are required with an FiLLiP:

(i) Where the appointed partner is a body corporate,

– a 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

(ii) Proof of address of registered office of an LLP.

(iii) Subscribers’ sheet including consent.

(iv) If the proposed name include words which require approval of regulated authorities, then in-principle approval of regulatory authority.

(v) If the proposed name is based on a registered trademark or is subject matter of an application pending for registration under the Trade Marks Act, then, copy of approval of the owner.

(vi) Copy of approval in case the proposed name consists of any ‘Prohibited words under The Emblems And Names (Prevention Of Improper Use) Act, 1950’.

(vii) If the proposed name contains any word which implies a collaboration and/or connection with a foreign country or place then it is mandatory to attach the copy of approval of such competent authority.

(viii) In case the proposed name is identical with an existing company or an existing LLP, copy of Board resolution of an existing company or consent of an existing LLP as a proof of no objection

(ix) In case DIN / DPIN is to be allotted to designated partners through FiLLiP form, PAN, proof of identity and address.

(x) In case partner or designated partner is also a director or partner in any other company or LLP, Detail of LLP(s) and/ or company(s) in which partner/ designated partner is a director/ partner.

(xi) Optional attachment, if any.

(10) FiLLiP form is to be digitally signed by proposed designated partner and a professional.

(11) Resubmission of FiLLiP is allowed twice provided the time limit of both chances should not exceed 30 days from the date of intimation.

LLP-3 –Information with regard to LLP Agreement and changes, if any

 (1) Form 3 relates to filing of information with regard to LLP Agreement. It includes various details including date, place of agreement, business activities, total contributions, total number of partners, clauses relating to rights and duties of partners, etc.

(2) Form 3 is required to be certified by a CA/CS/CMA in practice.

(3) Initial agreement in pdf format is required to be attached with the form.

(4) Stamp duty as applicable on LLP agreement is to be paid which varies from State to State.

(5) Fees for filing Form-3 is as follows:

 (6) Form 3 should be filed within 30 days from the date of incorporation of company.

5. Closing remarks

After speeding up the company formation process by introducing RUN and SPICE Form in this calendar year, the MCA has now introduced similar web service ‘LLP RUN’ and online incorporation form ‘FiLLiP’ for registration of an LLP for ease of doing business in India. With the aid of new forms, LLP formation process becomes simple and easy and that also reduces the time for formation of new LLP. Continuous efforts for simplifying LLP incorporation in future can also result in dispensing of requirement of separate applications for PAN and TAN for proposed LLP and allotting the same through FiLLiP itself.