Limited Liability Partnership (LLP) in India – All you need to know about

LLP, a legal form available world-wide is now introduced in India and is governed by the Limited Liability Partnership Act 2008, with effect from April 1, 2009. link (pdf) .

LLP combines the advantages of ease of running a Partnership and separate legal entity status and limited liability aspect of a Company.

Here are some of the main features of a LLP
LLP is a separate legal entity separate from its partners, can own assets in its name, sue and be sued.
Unlike corporate shareholders, the partners have the right to manage the business directly
One partner is not responsible or liable for another partner’s misconduct or negligence.
Minimum of 2 partners and no maximum.
Should be ‘for profit’ business.
Perpetual succession.
The rights and duties of partners in LLP, will be governed by the agreement between partners and the partners have the flexibility to devise the agreement as per their choice. The duties and obligations of Designated Partners shall be as provided in the law.
Liability of the partners is limited to the extent of his contribution in the LLP. No exposure of personal assets of the partner, except in cases of fraud.
LLP shall maintain annual accounts. However, audit of the accounts is required only if the contribution exceeds Rs. 25 lakhs or annual turnover exceeds Rs.40 lakhs.

A LLP is indeed advantageous because of comparatively lower cost of formation, lesser compliance requirements, easy to manage and run and also easy to wind-up and dissolve, no requirement of minimum capital contributions, partners are not liable for the acts of the other partners and importantly no minimum alternate tax (as of date). But, LLP cannot raise money from the public.

The process for incorporating a LLP is pretty simple. The flow chart here depicts it clearly.

The Registrar of Companies (ROC) is the authority having jurisdiction over the incorporation. The steps required are:
Decide on the Partners and the Designated Partners
Obtain Designated Partner Identification Number (DPIN) and a digital signature certificate.
Decide on the name of the LLP and check whether it is available.
Draft the LLP agreement
File the LLP Agreement, incorporation documents and obtain the Certificate of Incorporation.

In order to help you decide on which legal form to choose, here’s a feature comparison between the LLP, Partnership firm and a Company:

http://www.pluggd.in/limited-liability-partnership-llp-company-comparison-297/

But, LLP might not be a choice due to certain extraneous reasons, for example, DOT would approve the application for a leased line only for a company; Angels / VCs would be comfortable investing in a company.

The framework for incorporating a LLP is in place and currently registrations are centralized at Delhi.

Please leave your questions in the comments section.