The ultimate goal of a limited partnership is to raise capital for the establishment and growth of the business and make profits.
The main goal of a limited partnership is to provide limited liability protection for the partners while also allowing them to share in the profits and losses of the business.
In a limited liability partnership, there is a big advantage in that the partners are not personally liable and cannot be forced to pay a business liability or debt with their personal property.
In this blog, we will cover what a limited partnership is, how to form one, the document requirements, and how to form a limited partnership.
What is a limited partnership?
The Limited Liability Partnership Act, 2008, regulates LLPs in India and was introduced in 2008.
A limited liability partnership is a globally recognised form of business entity because it possesses the benefits of a Private Limited company and an LLP. It is a business entity with limited liability imposed on the partners of the firm. Partners personal property does not cease in a situation of insolvency due to huge debts. The debts are recovered only through the assets of the LLP.
A limited liability partnership has low compliance and fewer regulations. It has a separate legal existence from its partners.
How do I form a limited partnership?
A limited liability partnership is one of the standard options available for entrepreneurs to start their businesses.
To form a limited partnership, one needs to follow the steps below:
- Have a business idea?
As this is one of the major steps in forming a limited partnership, it is important to have a business idea, whether you adopt it for any business entity or not.
2. Find a few partners.
At least two partners are required to register an LLP. However, there is no maximum limit on the number of partners you can have. One partner must be a resident of India.
- Apply for a digital signature.
To apply for a digital signature, the next step will require the following documents:
- Photograph of the applicant.
- Pan Card of the applicant.
- Email ID and phone number.
- Aadhar card of the applicant.
The applicant can submit all the documents online.
- Filing a name application with the MCA.
After applying with a digital signature, the next step is to file a name application in the form LLP-RUN.
The name should be unique and not similar to any existing companies.
This form is filed to reserve a company’s proposed name, under which applicants will operate their company’s functions. This form is processed by the CRC, or central registration center.
The registrar will approve the name after careful consideration, as it is one of the most important steps for any business entity to reserve a name with the MCA.
After careful checking, the registrar will approve or reject the name for which the applicant has applied. There will also be chances of resubmission, for which the applicant has to respond.
5. DIN Application and LLP Incorporation
After getting the name approval, the applicants can fill out the FILLIP (Form for Incorporation of Limited Liability Partnership and DIN Application).
The DIN application is a mandatory requirement for the designated partners of the LLP and needs to be completed after getting name approval.
For FILLIP, you must submit all the required documents to the MCA, like all the partner details, email IDs, phone numbers, photographs, identity proofs, and address proofs of all the partners. For the company’s address, there must be Indian address proof, like an electricity or telephone bill.
After applying with all the information required for the LLP, the MCA concerned person will check the form carefully, and if he finds everything fine, he will issue a certificate of incorporation, PAN card, and Tan card for the LLP.
6. Filing an LLP Agreement
As per the Limited Liability Partnership Act, 2008, the filing of the LLP agreement is mandatory within 30 days of the LLP’s incorporation. It is filed with the registrar on LLP Form 3, which is available on the MCA portal.
A limited liability partnership is a written agreement executed among the partners of a limited liability partnership and between the LLP and its partners. It defines the mutual rights and duties of the partners of the LLP.
What are the documents required for LLP incorporation?
LLP incorporation is easy because it has a less formal structure and documentation.
The following documents are required for LLP incorporation:
- Pan card (both partners)
- Adhar Card (both partners)
- Identity proof of both partners (voter, passport, or driving licence)
- Passport photos (the latest photos of both partners)
- Business Address Proof (Latest Electricity Bill, Telephone Bill, or Telephone Bill of the Registered Office)
- NOC from the Owner
- Residence proof of both partners (latest bank statement, statement, telephone or mobile bill, electricity or gas bill)
Digital Signature Certificate
One of the designated partners needs to opt for a digital signature certificate, and all documents and applications will be digitally signed by the authorized signatory.
These documents are required for Limited partnerships.
The bottom line
In a nutshell, a limited liability partnership is a kind of business entity that is owned by more than one person. It has two general partners: a general partner and a limited partner, where The general partner can take decisions and has full liability, whereas the limited partner has no participation in the daily business activities and management but has a share in investment, profit, and taxes as well.To sum up, you can hire an LLP formation service professional at JustStart. They can offer you invaluable advice on your business formation, from opening your business, drafting a partnership agreement, opening your current account, and other procedures of legal yearly compliance.