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Law Service

LLP Formation Procedure

There are certain primary requirements to be satisfied for the formation of an LLP:

1)Partners in LLP

At least two persons are required to form an LLP. A corporation can be a part of an LLP by appointing a person as its nominee. The following entities can be a part of an LLP:
  • Another LLP formed in or outside India.
  • A person who is a resident in or outside India.
  • A company incorporated in or outside India.
  • At least one of the partners shall be a resident of India.

2) Incorporation Document

The partners must subscribe their names to a document called an Incorporation document, which must be submitted to the Registrar of Companies. The incorporation document must contain basic information such as the name of the LLP, its proposed business, address of the registered office, name, address and photographs of the persons who are willing to be its partners.

3) Contribution

Every partner in an LLP is expected to contribute to it in some way. The contribution can be in any form like tangible/intangible, movable/immovable or in some other way that would benefit the LLP such as money/promissory notes or other contract for services performed or to be performed. The contribution intended to be paid by the partners and the form in which it is to be paid shall be specified in the Partnership incorporation agreement.

4) Director Identification Number

Every designated partner has to obtain a DIN from the central government. If it is already owned by any partner then the same shall be used in forming LLP. A designated partner means a partner who is entitled as such in the incorporation documents and is designated as such according to the terms in the Limited liability partnership agreement. There has to be at least two designated partners in an LLP.

5) Digital Signature Certificate

The forms like eForm 1, eForm 2, eForm 3 are expected to be filed by the partners. These forms are filed electronically through internet and it has to be signed by the partners. It is not possible to sign on these forms manually. Therefore, to sign these forms the designated partner of the proposed LLP has to have a Digital Signature Certificate (DSC). Obtaining a DSC will prove to be beneficial in filing other forms in the future of the LLP.

6) Naming the LLP

Naming the proposed LLP is one of the main processes of its entire formation procedure. The name has to represent the kind of business or activity proposed to be carried on by the LLP. The following criteria have to be taken into account before choosing a name for the LLP:
  • LLP with similar name
  • The proposed LLP should not have a name that is similar to an already existing LLP which is registered in India.
  • Prohibited words
The Ministry of Corporate Affairs of India has specified certain words which shall not be a part of the LLP name. These guidelines are specified under The Emblems and Names (Prevention of improper use), 1950. Many governmental authorities like Securities Exchange Board of India, Reserve Bank of India have stated that certain words if it has to be part of any LLP name require their firsthand consent.

7) LLP Agreement

The partners intending to form a LLP must form an agreement between them which is known as LLP agreement. The LLP agreement is an agreement between the partners as well as between the partners and the LLP. It lays down their rights and duties and acts as the basic structure of the LLP. The agreement shall have the following contents:
  • Name of the LLP
  • Partners & Designated partners names.
  • Kind of contribution
  • Profit sharing ratio
  • Rights & duties of partners
    • Any amendments made to the LLP agreement shall be notified to the Registrar of LLP. In the case of absence of an agreement between the partners, the rights and duties shall be carried out as per Schedule 1 of the LLP Act.

      8) Registered Office

      The LLP should have a registered office where all the activities of the LLP would take place. The ownership or the right to use any space as the registered office has to be proved before the Registrar of LLP.

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