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The Limited Liability Partnership Act 2008 does not define limited liability Partnership as such.

In simple words limited liability partnership is “a legal business entity partnership whereby the LLP is responsible for the debts of the business and not the partners.”

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LLP shall be a body corporate and a legal entity separate

from its partners. It will have perpetual succession; like a

corporation;

The Limited Liability Partnership shall be required to have

Minimum- at least two partners

Maximum- no limit

Any individual or body corporate may be a partner in an LLP.

The provisions of the Indian Partnership Act, 1932 shall not

be applicable to an LLP.

Every LLP is required to have either the words limited liability

partnership or the acronym LLP as the last words of its

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1) Partner is the agent of the LLP and not of the partners.

2) LLP is not bound by the acts of partners, has no authority to

act for LLP.

3) LLP is liable if a partner is liable to any person as a result of

wrongful act or omission on his part in the course of the business

of LLP or with its authority.

4) Obligations of LLP shall be solely obligation of LLP and not the

partners.

5) Partner is not personally liable (directly or indirectly) for any

obligation of the limited liability partnership whether arising in

contract or otherwise.

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6) Unlimited liability of LLP and partners in case of fraud.

a) In the event of an act carried out by a LLP or any of its

partners, with intend to defraud creditors of the LLP or any other

person for any fraudulent purpose, liability of that person shall be

unlimited for all.

b) Where any person knowingly carried on a business in the

manner foresaid be punishable with imprisonment for a term which

may extend to 2 years and fine of minimum 50,000 and which

may extend to 5,00,000.

c) LLP and such partner shall be liable for compensation to

any person who has suffered any loss or damage by reason of such

conduct.

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Steps required to be followed :-

Step 1: Deciding the partners and Designated partners

1. A LLP can be incorporated with a minimum of at least

two persons who can be individuals or Body

Corporate/company through their nominees.

2. Out of the total number of partners, at least two shall be

designated partners.

3. Among those designated partners at least one must be

Indian resident.

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Parameters for deciding the Partners and Designated Partners :

1) Partners of LLP

minimum 2 partners.

In case, any Body Corporate is a partner, then it will be

required to nominate any person (natural) as its nominee for

the purpose of the LLP.

Partner of LLP can be consisted of

Companies incorporated in and outside India.

LLP incorporated in and outside India.

Individuals Resident in and outside India.

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2) Designated Partner

Every LLP should have minimum 2 designated partners who

are individuals and at least one of them should be resident in

India.

A person or nominee of a body corporate, intending to be

appointed as or who is appointed as designated partner of LLP

should hold a Designated Partner Identification Number

(DPIN) allotted by the Ministry of Corporate Affairs.

DPIN can be obtained by submitting application along with

address proof and identity proof of the individuals.

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`Step 2 : Obtaining DPIN No. and Digital signature

1) Designated Partner identification number (DPIN)

Section 7(6) of LLP act 2008, provides that every Designated

Partner must obtain it.

DPIN is an eight digit numeric number allotted by the

Central Government in order to identify a particular partner .

It can be obtained by making application in e-Form 7 to central

govt. with physical application, identity and address proof of

the person with filing fee of Rs.100.

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2) 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 (CS/CA).

Note:- At least one Designated Partner has to obtain the

digital signature certificates.

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Step 3 : Checking the name availability and reservation of name.

Anyone intending to incorporate an LLP has to evaluate his proposed name

under the prescribed parameters and make an application in e-Form 1 of

Rule 18(5) of the Limited Liability Partnership Act 2008, for reservation

of the desired name.

Name must not be similar with company or LLP already registered in India.

It should not contain words prohibited under the Emblems and Names

Act,1950 i.e. undesirable by govt.

Upto 6 choices can be indicated .

File e-Form1 along with a filing fee of Rs 200.

Any partner or designated partner in the proposed LLP may submit e-form1.

Details of designated partners (one of them must be resident in India).

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Step 4 : Drafting of LLP agreement

The next is drafting of limited liability partnership agreement governing the

mutual rights and duties among the partners and among the LLP and its

partners.

The basic contents of Agreement are:

1. Name of LLP

2. Name of partners and Designated partners

3. Form of contribution

4. Profit sharing ratio

5. Rights and duties of partners

6. Proposed business

7. Rules for governing the LLP

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Note :

In case no agreement is entered into, rights and duties as

prescribed under Schedule 1 of LLP act shall be applicable.

It is not necessary that LLP agreement should be signed at the

time of incorporation, as the details of the same needs to filed

in e-form 3 within 30 days of incorporation but in order to

avoid any conflict regarding the terms and conditions , it is

beneficial to have the LLP agreement drafted and executed

before the incorporation.

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Step 5 : Filing of Incorporation documents.

1) Filing of incorporation documents

Documents required:

a) E-form 1- Name Availability Application

b) E-form 2- Incorporation Document

c) E-form 3- Details of LLP Agreement

d) E-form 4- Consent of partners (with ID and address proof)

e) E-form 7- Application for DPIN.

f) Subscription sheet .

g) LLP agreement duly stamped as per Stamp Act of State.

h) Proof of address of Registered Office.

I) Consent of Partners and Designated Partners

2) Electronic declaration to Registrar of LLP for incorporation.

3) Payment of prescribed fees.

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b) E-Form 2 : Incorporation Document

Once the name is reserved by the registrar, fill up e-Form-2

Incorporation Document and statement.

Statement in the e-form is to be digitally signed by designated

partner having permanent DPIN and also to be digitally signed by

an advocate/CS/CA in practice.

This document includes the amount contribution and consent

of partners for forming a limited liability partnership to carry on

a lawful business with profit motive and stating that all the

requirements of limited liability partnership act 2008, regarding

incorporation of LLP in India have been complied with.

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c) E-Form 3 : Details of LLP Agreement

This form provides for the necessary information in respect to the LLP

Agreement entered into between the partners.

d) E-Form 4 : Consent of Partners

Consent of each partner to become a partner of Limited Liability Partnership

along with their address and identity proof to be filed with the Registrar of

Companies.

Note: E-Form 3 & 4 are required to filed within 30 days of the

incorporation.

f) Subscription sheet : Just like in case of Company formation, the

partners are required to subscribe their names along with signatures to the

subscription sheet, which shall be witnessed by any CA/CS/advocate.

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Step 6 : Certificate of Incorporation

After the registrar is satisfied that all the formalities with

respect to the incorporation has been complied, he will

issue a certificate of incorporation as to formation of the

LLP within maximum of 14 days of filing Form-2 and

will issue a Certificate of Incorporation in Form-16.

Note: The certificate of incorporation once issued shall be

the conclusive evidence of formation of the LLP.

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Basis ofDifference

LIMITED LIABILITY PARTNERSHIP

PARTNERSHIP FIRM

COMPANY

1. Governing Law

The Limited Liability Partnership Act, 2008

The Indian Partnership Act, 1932

The Companies Act, 1956

2. Registration Compulsory Optional Compulsory

3. Foreign Nationals as shareholder / Partner

Foreign nationals can be partners.

Foreign nationals cannot form partnership firm.

Foreign nationals can be shareholders.

4. Separate Legal Entity

Separate legal entity, separate from its partners/designated partners.

Not a separate legal entity from partners. Partners are collectively referred as firm.

Separate legal entity, separate from its member, directors.

5. Perpetual succession

It has perpetual succession

It does not have perpetual succession.

It has perpetual succession

6. Common Seal

LLP have its own common seal

Not required Every company have its own common seal.

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6. Name Suffix ‘LLP’ or Limited Liability Partnership has to be added to the name.

No such requirement Suffix ‘Limited’ or ‘Private Limited’ has to be added to the name.

7. Ownership of Assets

The LLP has ownership of assets and Partners only have capital contribution in the LLP

Partners have joint ownership of all the assets

The company has ownership of assets and members only have shares in the company.

8. Liability of partners/ members

Limited (upto their capital contribution),

Unlimited limited to the extent of shares held by them.

9. Agency Relationship

Partners are agents of LLP only, not of other partners.

Partners are agents of the firm and each other

The Directors act as an agents of the company.

10. Charter LLP Agreement is a charter of the LLP

Partnership Deed is a charter of the firm.

Memorandum and Articles of Association is a charter of the Company

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11. Minimum Capital requirement

No such requirement

No such requirement Minimum paid up capital of Rs. 1,00,000 for incorporation of Private company and Rs. 5,00,000 for incorporation of Public company.

12. Minimum Number of Partners / Members

Minimum- 2 partners Minimum- 2 partners Minimum- 2 (private Company), minimum-7 (public company)

13. Maximum number of Partners / Member

Maximum- no limit Maximum 10 (banking business) and 20 (other business)

Maximum- 50 (Private Company), maximum- no limit (Public Company)

14. Manner of Keeping Books of Accounts

Cash basis or accrual basis

Cash basis or accrual basis

Accrual basis

15. Voting Rights Each partner has only one vote

No voting rights Voting rights are in proportion to the shares held by members.

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