1. Concept of LLP

          Limited Liability Partnerships (LLPs) are commercial vehicles which combine the features of partnership and company form of business .The concept of Limited Liability Partnership (LLP) has been introduced in India by way of Limited Liability Partnership Act, 2008 (notified on 31st March 2008).

          A Limited Liability Partnership combines the advantages of both the Company and Partnership into a single form of organization. In an LLP one partner is not responsible or liable for another partner's misconduct or negligence. In an LLP, all partners have limited liability for each individual's protection within the partnership, similar to that of the shareholders of a limited company. However, unlike the company shareholders, the 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.

2. LLP - A Separate Legal entity

          LLP is a separate legal entity, liable to the full extent of its assets; the liability of the partners would be limited to their agreed contribution in the LLP. Further, no partner would be liable on account of the independent or un-authorized actions of other partners, thus allowing individual partners to be shielded from joint liability created by another partner's wrongful business decisions or misconduct.

3. Advantages and Disadvantages of LLP

Advantages

• Separate legal entity
• Easy to establish
• Flexibility without imposing detailed legal and procedural requirements
• Perpetual existence irrespective of changes in partners
• Internationally renowned form of business in comparison to Company
• No requirement of minimum capital contribution
• No restrictions as to maximum number of partners
• LLP & its partners are distinct from each other
• Partners are not liable for Act of other partners.
• Personal assets of the partners are not exposed except in case of fraud.
• Easy to dissolve or wind-up
• Professionals like CS / CA / CWA / Lawyers can form Multi-disciplinary Professional LLP
• No requirement to maintain statutory records except Books of Accounts
• Less Cost of formation (Compared to a company)

Disadvantages

• LLP cannot raise funds from Public
• Any act of the partner without the other may bind the LLP.
• Under some cases, liability may extend to personal assets of partners.
• No separation of Management from owners

4. Partners / Designated Partners of LLP

          An LLP should have minimum 2 partners. Every LLP should have minimum 2 designated partners who are individuals and at least one of them should be residing in India.

          Designated Partner of LLP shall be responsible for the doing of all acts and things that are required to be carried out by the LLP and is responsible for the compliance of the provisions and filing of document / returns/ statements of LLP Act and as may be specified in the LLP agreement

          Designated Partner shall be liable to all penalties imposed on the LLP for any contravention of provisions of LLP Act.

5. Designated Partner Identification Number (DPIN)

          A person or nominee of a body corporate, intending to be appointed as who is appointed as designated partner of LLP should hold a Designated Partner Identification Number (DPIN) allotted by the Ministry of Corporate Affairs.

          IMPORTANT NOTE: Director Identification Number (DIN) allotted under the Companies Act and DPIN are not same. DIN holder has to make a separate application for DPIN with his/her DIN. On submission of documents for verification, the DPIN status will be confirmed.

6. Management of LLP

          Day to day operations of Limited Liability Partnership will be managed by Designated Partners, who are responsible for ensuring the compliances of all applicable laws.

          Limited Liability Partnership is managed as per the LLP Agreement, however in the absence of such agreement the LLP would be governed by the framework provided in Schedule 1 of Limited Liability Partnership Act, 2008 which describe the matters relating to mutual rights and duties of partners of the LLP and of the limited liability partnership and its partners.

7. Capital Contribution to LLP

          Unlike in the case of a company, there is no requirement for minimum capital contribution for a LLP. However, the registration cost for LLP is determined on the basis of amount of contribution.

8. FDI in LLP

          The Government of India has not notified the policy for Foreign Direct Investment in LLP.

9. Reservation of Name by a LLP registered outside India

          A foreign LLP or a foreign company can reserve its existing name by which it is registered in the country of its incorporation by making an application to Ministry of Corporate Affairs. The reservation will be valid initially for three years and is renewable thereafter.

10. Branch office of Foreign LLP

          A LLP registered outside India can establish an office in India and has to comply with the provisions of LLP Act 2008.

11. LLP Name - Guidelines

          The guidelines for the availability of LLP names are prescribed by the LLP Act

• The name of the limited liability partnership shall not be one prohibited under the Emblems and Names (Prevention of Improper Use) Act, 1950
• A Name shall not generally be reserved, if -
  • Offensive Names: It includes any word or words which are offensive to any section of the people;
  • Translation: The proposed name is the exact Hindi or English translation of the name of an existing limited liability partnership in English or Hindi, as the case may be; Phonetic Resemblance: The proposed name has a close phonetic resemblance to the name of a LLP in existence, for example, J.K. LLP., Jay Kay LLP;
  • Co-operative Sector: It includes the word Co-operative, Sahakari or the equivalent of word 'co-operative' in the regional languages of the country;
  • Government Patronage: It connotes the participation or patronage of the Central or State Government, unless circumstances justify to, e.g., a name may be deemed undesirable in certain context if it includes any of the words such as National, Union, Central, Federal, Republic, President, Rashtrapati, etc;
  • The proposed name contains the words 'British India';
  • Assocation with Embassy: The proposed name implies association or connection with any Embassy or Consulate or of a foreign government which suggests connection with local authorities such as Municipal, Panchayat, Zila Parishad or any other body connected with the Union or State Government;
  • Vague Names: The proposed name is vague like D.I.M.O. Limited liability partnership or I.V.N.R. Limited liability partnership or S.S.R.P Limited liability partnership;
  • Close Similarity: It is different from the name or names of the existing limited liability partnership only to the extent of having the name of a place within brackets before the word 'limited liability partnership', for example, Indian Press (Delhi) LLP should not be allowed in view of the existence of the LLP named Indian Press LLP;
  • Trade mark: It includes name of registered Trade mark, unless the consent of the owner of the trade mark has been produced;
  • Identical Names: The proposed name is identical with or too nearly resembles the name of a firm or LLP or company incorporated outside India and reserved by such firm, LLP or company with the registrar in accordance with these rules;
  • It is identical with or too nearly resembles the name of the limited liability partnership or a company in liquidation or it is identical with or too nearly resembles names of the LLP or a company which is struck off, up to the period of 5 years;
  • Name Requiring Approval: It includes words like 'Bank', 'Insurance' and 'Banking', 'Venture capital' or 'mutual fund' or such similar names without the approval of the regulatory authority;
  • Misleading Names: It is intended or likely to produce a misleading impression regarding the scope or scale of its activities which would be beyond the resources at its disposal;
  • Countries Names: The proposed name includes words like French, British, German etc., unless the partners satisfy that there is some form of collaboration and connection with the foreigners of that particular country or place, the name of which is incorporated in the name;
  • Professional Names: The proposed name of limited liability partnership includes the words company secretary, chartered accountant, advocates or such similar words as indicative of a profession, as part of the proposed name, the same shall be allowed only after obtaining approval from the Council governing such profession or such authority as may be nominated by the Central Government, in this behalf.
  • Prohibited Words: The Ministry of Corporate Affairs of India has prescribed certain words, which should not form part of the name of LLP intended to be incorporated in India, such words are prohibited under The Emblems and Names (Prevention of improper use) Act, 1950.
  • Words Based on Approval: Various government regulatory authorities operating in India like Securities & Exchange Board of India, Reserve Bank of India, has prescribed certain words, which if forms part of the name of the proposed LLP to be incorporated, requires there first hand approval. Names reserved for Foreign LLP/Companies: In case Foreign LLP/Companies have reserved their name such names shall not be available for registration.