A Limited Liability Partnership (LLP) is a form of business that offers the combined features of ‘Partnership’ and ‘Limited Company’ business structures. This business form was introduced in India in April 2009 with the enactment of the Limited Liability Partnership Act, 2008.
In an LLP, a partner is not responsible or liable for another partner’s misconduct or negligence. Instead, all partners have limited liability, limited to their own acts of commission or omission, similar to shareholders’ liabilities in a limited company.
However, unlike company shareholders, LLP partners have the right to manage the business directly. An LLP also limits the personal liability of a partner for the errors, omissions, incompetence, or negligence of the LLP’s employees or other agents. The management of day-to-day business is outlined in the LLP Agreement, providing partners with the freedom to regulate affairs of the business.
LLP registration is administered by the Ministry of Corporate Affairs (MCA) through the Office of the Registrar of Companies. The incorporation process is fully electronic, similar to the company registration process, i.e. applications and documents are filed electronically and the Registrar issues a digitally-signed Certificate of Incorporation (COI).
The name of a Limited Liability Partnership shall end with the words ‘LLP’ of ‘Limited Liability Partnership’. Proposed LLP Name shall comply with the LLP Name Availability Guidelines under Limited Liability Partnership Act 2008.
There are TWO ways for reserving a name for an LLP.
a. RUN (Reserve Unique Name) is an easy and web-based application for reservation of an LLP Name. The name approved under RUN Process is valid for a period of 90 days from the date of approval. In one application, TWO names can be submitted for approval under RUN process. If the application is rejected, the another Two more names can be submitted again. If that also rejected by ROC office, a fresh application to be filed with fresh filing fee.
b. FiLLiP (Form for Incorporation of Limited Liability Partnership) LLP Incorporation Filing process is an integrated single point application for Reservation of Name, Allotment of DIN for Designate Partners and Incorporation of a New LLP. Under FiLLiP application, only ONE name can be submitted for approval.
FOREIGN DIRECT INVESTMENT (FDI) IN LLP
FDI is permitted in LLPs operating in business activities where 100% FDI is allowed through the automatic route. FDI in LLPs will not be allowed in sectors such as agricultural/plantation activity, print media or real estate business.