Limited Liability Partnership (LLP) - FAQ

Limited Liability Partnership (LLP) introduced in India by LLP Act, 2008 and though it is now nearly 7-8 year old Act, there are still many confusions around LLP and its basic concept. Like what is LLP, How to incorporate LLP, what are the advantages of LLP, Who can form it etc.

    Through this FAQ, I have tried answering few common queries, if you have any other query, you can send me an EMAIL with your query:

FAQ on LLP (October 10, 2017)

1.    What are the steps to incorporate LLP?

Name reservation: The first step to incorporate Limited liability partnership (LLP) is reservation of name of LLP. Applicant has to file eForm 1, for ascertaining availability and reservation of the name of a LLP business.

Incorporate LLP: After reserving a name, user has to file eForm 2 for incorporating a new Limited Liability Partnership (LLP). eForm 2 contains the details of LLP proposed to be incorporated, partners’/ designated partners’ details and consent of the partners/ designated partners to act as partners/ designated partners.

LLP Agreement: Execution of LLP Agreement is mandatory as per Section 23 of the Act. LLP Agreement is required to be filed with the registrar in eForm 3 within 30 days of incorporation of LLP.

2.    What is the Structure of an LLP?

LLP shall be a body corporate and a legal entity separate from its partners. It will have perpetual succession.

3.    What are the Advantages of LLP form of Business?

LLP form is a form of business model which:

(i) is organized and operates on the basis of an agreement.

(ii) provides flexibility without imposing detailed legal and procedural requirements

(iii) enables professional/technical expertise and initiative to combine with financial risk taking capacity in an innovative and efficient manner

4.    Can an existing partnership firm be converted to LLP?

Yes, an existing partnership firm can be converted into LLP by complying with the Provisions of clause 58 and Schedule II of the LLP Act. Form 17 needs to be filed along with Form 2 for such conversion and incorporation of LLP.

5.    Can an existing company be converted to LLP?

Yes, any existing private company or existing unlisted public company can be converted into LLP by complying with the Provisions of clause 58 and Schedule III and IV of the LLP Act. Form 18 needs to be filed with the registrar along with Form 2 for such conversion.

6.    Can a listed company be converted to LLP?

No, only private / unlisted public company can be converted into LLP.

8. I want to convert my private company ‘ABC Infotech Private Limited’ into LLP but with name ‘DEF Infotech LLP’. Can I get my LLP registered with new name?

Any private company or unlisted public company can be converted into LLP. However, in this case LLP shall take same name as that of the company at the time of conversion.

9. Whether name of LLP can end with words like ‘Limited’ or ‘Pvt. Limited’?

No, name of the LLP shall end with either ‘Limited Liability Partnership’ or ‘LLP’. Word ‘limited’ shall be allowed in name only within ‘Limited Liability Partnership’.

10. What is the treatment for stamp duty issues, both in terms of original incorporation and conversion from other business structures? Would there be any stamp duty exemption in case of conversion?

Since Stamp Duty is the subject reserved for the States, the LLP Act does not contain any provision for treatment of stamp duty issues. The stamp duty payable will depend upon the relevant Stamp Act prescribed by the State Government/Union Territory.

11. Can I comply with the requirement of two designated partner by appointing myself as a designated partner in individual capacity as well as a nominee of body corporate?

No, Appointment of at least two “Designated Partners” shall be mandatory for all LLPs. Every LLP shall be required to have atleast two Designated Partners who shall be individuals and at least one of the Designated Partner shall be a resident of India. In case of a LLP in which all the partners are bodies corporate or in which one or more partners are individuals and bodies corporate, at least two individuals who are partners of such LLP or nominees of such bodies corporate shall act as designated partners.

12. Which forms are required to be filed to Registrar in case of appointment of new partners/ resignation of existing partners from the LLP?

    

    eform 3 and eform 4 are required to be filed for appointment of new and resignation of existing partners within thirty days of such cessation or appointment without additional fee and with additional fee thereafter

13. What is the process for intimation of changes in the partner’s details?

The change in partner’s details can be intimated by filing eform 4 within thirty days of such change without additional fee and with additional fee thereafter.

14. Is it mandatory to file and get registered the partnership agreement under LLP?

Yes, it mandatory to execute and file LLP Agreement in view of Section 2(0) & (q) , 22 and 23 of the Act.

As per provisions of the LLP Act, in the absence of agreement as to any matter, the mutual rights and liabilities shall be as provided for under Schedule I to the Act. Therefore, in case any LLP proposes to exclude provisions/requirements of Schedule I to the Act, it would have to enter into an LLP Agreement, specifically excluding applicability of any or all paragraphs of Schedule I

LLP Annual Filing

15. What are the documents required to be filed by a LLP annually?LLP is required to file LLP LLP Form 8 (Statement of Account & Solvency) and LLP Form 11 (Annual Return) annually. 

   The ‘Annual Return’ is required to be filed within 60 days of close of the financial year and ‘Statement of Accounts & Solvency’ shall be filed within 30 days from the end of six months of the financial year to which it relates. 

      Every LLP has to maintain uniform financial year ending on 31st March of a year.

16.What is “Statement of Accounts and Solvency” and whether it has a prescribed format?

Every LLP is required to file ‘Statement of Accounts & Solvency’ in prescribed LLP Form 8 which contains a declaration on the state of solvency of the LLP by the designated partners and also information related to statement of assets and liabilities and statement of income and expenditure of the LLP. This form has to be filed by the LLP on an annual basis.

17. I have incorporated a LLP on 1st December of financial year, when do I require filing my statement of accounts and annual return?

In case LLP has been incorporated on or after 1st October of financial year, then LLP can close its first financial year either on the coming or next 31st March i.e. LLP files its first financial year details for 18 months.

18. After filing an eForm, do I need to keep track of my SRN?

Yes. One should keep a track of the SRN till it is approved. In case of any defect, incompleteness or to call any further information, concerned MCA office can mark the status of SRN as ‘Required Resubmission’ or ‘Waiting For User Clarification’. In such a case, the concerned company/ person will be required to rectify such defects or incompleteness or furnish further information, within prescribed period.

Regards,

CS Jigar Shah