incorporation of llp

8/12/2019 Incorporation of LLP

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Incorporation of Limited Liability Partnership

Institute of Lifelong Learning, University of Delhi

Discipline Courses-ISemester-I

Paper : Business LawUnit-III

Lesson: Incorporation of Limited Liability PartnershipLesson Developer: Ruchi Ahuja

College/Department: Lakshmi Bai College, University of Delhi


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Institute of Lifelong Learning, University of Delhi2

Table of Contents:Lesson: Incorporation of Limited Liability Partnership

1. Learning Outcomes2. Introduction3. Incorporation of Limited Liability Partnership

3.1: Registration of LLP3.2: Online Incorporation of LLP

3.3: Registered Office of LLP

4. Name of Limited Liability Partnership5. LLP Agreement6. Partners and Partners Relations7. Designated Partners8. Extent of Liability in an LLP

Summary

ExercisesGlossary

References

1. Learning Outcomes:

After you have read this chapter, you should be able to:

comprehend the concept of Incorporation of Limited LiabilityPartnership,

explainthe steps required to be undertaken forIncorporation of LLP, differentiatebetween Partner and Designated Partner, appreciaterelationships among different Partners, comprehendthe extent of liability in LLP, analyzethe personal liabilityof partners, developLLP agreement , obtain Digital Signature Certificate, understand the online procedure of registration of LLP, apply the knowledge of online registration of LLP.


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2. Introduction:

Figure 1: Evolution of LLP Act and Rules

The Limited Liability Partnership Act came into existence in 2009 for the formation of theprofessional enterprises such as consultancy firms of CA, CS, Advocates etc.; SMEs and

Micro enterprises. The firms registered under LLP Actgets the advantages of both the formsof organizations - Companies as well as the Partnership form of organization. A partnershipfirm with Limited Liability registered under this act is a body corporate having perpetual

succession butconfines the extent of partner's liability to the quantum of their contributions

towards LLP.

The incorporation of limited liability partnership is covered under Sec 11 of the LLP Act,

2009. The partnership can be registered as a firm by filing with the Registrar the necessary

documents or it can also be registered online.According to the requirements of LLP Act2009, every LLP shall have a registered office and shall be registered with a name that ends

with limited liability partnership orLLP. Anybody whether an individual or a body

corporate can form LLP or become a partner in LLP. However, the minimum number ofpartners to start LLP is two along with two designated partners.

A formal procedure with regard to the registration of this body corporate, LLP is definedunder section 11 of this Act and described below.

3. Incorporation of Limited Liability Partnership

Figure 2: Beginning of Partnership in the form of LLP


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Section 11describes thenecessary conditions that need to be fulfilled by the interested

partiesfor incorporationof an organization as a LLP firm.

One while getting registered oneself as a body corporate i.e. LLP, under the provisions ofthis actrequires to see:

That the document of incorporation shall be subscribed by two or more persons whohave joined to carry on a lawful business for earning profit.

Sec 11(2) provides that the incorporation document shall be in the prescribedformas framed under the LLP Act 2009 and must contain:

1) The proposed name of the LLP2) The prospectivebusiness to be conducted3) The place of operation of business4) Names and addresses of would be partners on incorporation5) Names and addresses of would be designated partners on incorporation6) Any other information as may be prescribed

The document pertaining to registrationshall be submitted to the Registrar of thestate i.e.where the place of operation of businessis situatedalongwith prescribed fee.

A statementto the effect that all requirements and rules of the LLP Act have beencomplied with, shall be signed by either one of the 1) CA- chartered accountant, or


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2)CS- company secretary, or 3)an advocate, or 4)an ICWA who is involvedin

formation of LLP and by any other subscriber to the document. This must be filed

alongwith incorporation document.

Penalty

Section 12 subsection 2 provides that a registrar may accept the statement of compliance

submitted under Section 11subsection 1 and clause (c) as a proof that all the rules,requirements etc. related to incorporation have been adhered completely.

However, if any of the provision for incorporation is ignored and/or falsely represented to be

complied, the subscriber shall have to face a penalty defined under section 11 (3).

A punishment with a fine which may range from ten thousand rupees to five lakh rupees

and imprisonment up to two years may be levied for a person who makes a false statementregarding compliance of the provisions of the LLP Act.

3.1Registrationof LLP

Section 12prescribes that thepartners have to comply with the provisions defined undersection 11. Upon compliance of these provisions by the firm, the Registrarshallwithinfourteendays;

(a)Register the document(s) pertaining to incorporation.(b)Issue a Certificate of Incorporation duly signedand sealed for authentication.

The certificate so issuedby the registrar, shall be a conclusive proof of incorporation of a LLP

by the name specified in the incorporation documents.Once the Certificate is given, an entryhas to be made in the Register of LLP and a LLP Identification Number (LLPIN) is given tothe LLP for further correspondence and reference.

Effects of Registration

Sec14 deals with the effects of registration. Once a limited liability partnership firm isregistered, that is, it receives the certificate of incorporation in the name applied and atthe address defined, it acquires the following rights. It can by its name:(a) Sue any party or be sued by anyone who is affected by its deeds,(a) All Movable or immovable,tangible or intangible property can be

acquired,owned,held and developed by the LLP,(b) Have a common seal, if the firm decides to have,


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(c) Does lawful acts like any other body corporate.

Value Addition 1: Did You Know?

Create an LLPClick on the link below to visit a site that offers the service of creating an LLP. The

site describes what an LLP is, the concept of government fees, how and when it is to

be paid, and other related practical aspects.This is one illustrative site, however, there are many such sites that offer the serviceof starting ones own LLP.

Source: http://taxmantra.com/incorporation-of-limited-liability-partnership-llp-services-in-india/

Figure3:Steps of Incorporation of LLP
http://taxmantra.com/incorporation-of-limited-liability-partnership-llp-services-in-india/http://taxmantra.com/incorporation-of-limited-liability-partnership-llp-services-in-india/http://taxmantra.com/incorporation-of-limited-liability-partnership-llp-services-in-india/http://taxmantra.com/incorporation-of-limited-liability-partnership-llp-services-in-india/http://taxmantra.com/incorporation-of-limited-liability-partnership-llp-services-in-india/


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3.2 Online Incorporation of LLP

Figure4: Online Registration

There is a provision of on-line registration too, if anyone feels interested in registering thelimited liability partnership firm on-line. The interested party can visit the site of Ministry ofCompany affairs and can look forward to follow the correct legal procedure for registration.

The site address: http://www.mca.gov.in/LLP/virtual_efiling.html

Before trying for on-line incorporation, one must ensure that he/she has the compatible

software to enable to complete the process on-line.

The interested party must have the operating system of Window 2000, Windows XP(sp3),

windows 7 or advanced versions or JDK1.6 updated version 30; the browser of internetexplorer version 6 and above, or Google Chrome or Mozilla Fire fox; The Adobe reader from7.5 to 10.1.4 and Java Runtime Environment. One also needs to havea scanner (above 200

DPI) for converting the attachments into PDF format, and broadband or higher Internet

connectivity.

After ensuring the availability of suitable virtual environment, one needs to proceed further

by following thegivenprocedure for registering an Indian LLP On-line:

1. First of all, one has to get registered at the LLP portal i.e. www.mca.gov.in2. Apply for a Designated Partner Identification Number by filing an e-form DIN-1 for

acquiring DIN or DPIN.3. Acquire the Digital signature Certificate(DSC) and register the same on the portal.A

person authorised by limited liability partnership will do all filings with DigitalSignatures.

4. One needs to download the required e-form from the LLP portal. (It facilitatesreading instructions or downloading of the same.)


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5. All necessary required documents, duly signed by the applicant(s)/subscribers/representatives are to be attached with the filled forms. The digital signature is to be

used for the purpose.6. Get the name of the LLP approved by the ministry by filing Form 1.7. The payments are made using electronic medium like credit/ debit cards/ Internet

banking/NEFT, pay later at Virtual Front Office(VFO). The payments can also be

made using traditional methods like cash or cheques at the bank counters at thedesignated network of banks through pre-filled challans generated at the system. An

acknowledgement or receipt is generated by the system for the applicant.

8. Once the LLP name is approved, file theForm 2 for getting LLP registered.Value Addition 2: Surf and Learn

Online Incorporation of Limited Liability Partnership1. Copy the address of the link given below in the browser and find more about the on-line

registration of a LLP firm.

http://www.mca.gov.in/LLP/AboutFiling.html

2. The forms can be downloaded from the link given below after getting registered at theLLP portal.

http://www.mca.gov.in/mca21/dca/downloadeforms/eformtemplates/1030-form1a.zip,or

http://www.mca.gov.in/DCAPortalWeb/dca/jsp/mydca/home/StaticFramePage.jsp?para1=/MCA21/dca_html/downloadeforms/Download_eForm_choose_llp.html

9) Click on New User Registration, to register.

After incorporation of LLP, one is supposed to file LLP agreement in Form 3within 30 days of

incorporation of LLP.


E-Forms Related to Online Registration of LLPClick on the link below to view the e-forms to be filled while registering an LLP online.

As the procedure for incorporation of an LLP is given, e-forms 1, 2, 3, 4, and 7 arehyperlinked. On clicking on these forms, a separate pdf file opens that describes what

information is to be provided through such forms.

Source:http://ourprofessionalteam.com/index.php?option=com_content&task=view&id=155&I

temid=37

3.3Sec 13[1]Registered Office of LLP

Once the body corporate, that is, the limited liability partnership is registered with its

registered office, all correspondence has to be posted or mailed at this registered office.

1. All communications and notices shall be addressed and received at the registeredoffice of the LLP.

2. An ordinary letter underpostal certificate or a registered letteror any other methodprescribed may be used for serving a document on LLP, or a partner, or a designated

partner.

Change of registered office[Sec 13[3]]
http://ourprofessionalteam.com/index.php?option=com_content&task=view&id=155&Itemid=37http://ourprofessionalteam.com/index.php?option=com_content&task=view&id=155&Itemid=37http://ourprofessionalteam.com/index.php?option=com_content&task=view&id=155&Itemid=37http://ourprofessionalteam.com/index.php?option=com_content&task=view&id=155&Itemid=37


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The registered office is important for any communication from government or any third

party. Hence, any change is to be notified properly. Any relocation in the registered office of

the LLP would be affected only when a notice of suchrelocation is submittedto the Registrar.Please visit the site of MCA to know about the LLP Act, LLP rules and LLP agreement (rule17 pertains to change in registered office)

PenaltySec 13 (4)prescribes that the Limited liability Partnership firm and all its partners are

punishable with a fine that may range from Rupees two thousand to Rupees twenty fivethousand in case of any contravention of any provision of this section i.e. section 13.

4.Name of Limited Liability Partnership

Since the LLP is a body corporate, it cannot name it by itself. No two body corporate canhave the same or similar names. Therefore, the firm has to seek approval from the registrarof Company Affairs. The names to the limited liability partnership firms are allotted by the

registrar of the company affairs in accordance with the rules framed by the centralgovernment.

Section 15of the LLP Act describes the provisions related to the name of the firm.

1. Name of every limited liability partnershipshould have the ending words of'LimitedLiability Partnership' or the acronym 'LLP' e.g. 'ABC CREATIVE LLP'

2.The central governmenthas the power to refuse to registeraLLP with a specific name,if in its opinion the name of the LLP is undesirable in any manner or it is similar to thename of another LLP firm or it projects a picture of similar name of any other

partnership firm or other limited liability partnership ora body corporate.

3. The registrar of Company Affairs has the power of reserving the name for theapplicant for a period of 3 months from the date of communication of the approval by

registrarSec 16.This power is exercised if the applicant has applied for such

reservation in the prescribed format along with the desired fee and the registrar issatisfied that the proposal is in total confirmation to the provisions of Section15 (2).It can be the name of the proposed firm or a proposal to change the existing name.

4. The foreign LLPs can reserve the names under which they are operating in their

native places or countries, for a period of three years. After the expiry of that periodthey again have to apply under Form 25.

Section 17provides for the change of name if the non-permissible name is allotted by the

registrar.

If through inadvertence or otherwise a limited liability partnership has been allotted a name

similar to the name of other LLP, it has to rectified under the provisions of 'Rectification ofName'. Under the process,a direction may be issued by thecentral government tomake the

necessary change within 3 months of receiving the direction. The central government mayalso allow a longer period.

PenaltyIf any LLP firm,fails to comply with the direction u/s 17(1),it is liable to punishment ofRupees Ten thousand extendable to Rupees five lakhs and a fine on the designated partner

of Rs Ten thousand upto Rupees one lakh underSection 17(2).

Section 19deals with provisions with regard to the alteration of name already registered.


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Any alteration in thename of the registered limited liability partnership firm is acceptable to

the law. It can be affectedbynotifyingthe change to the registrarin the prescribed form alongwith the required fees.

Penalty

The partners and the partnership firm with limited liability is subject to a penalty if it makesa wrongful or improper use of words, LLP or limited liability partnership, conferring special

meaning to the business or firm or when it is not duly registered under the LLP Act 2008.

The penalty underSec 20may range from fifty thousand rupees to five lakh rupees, mayalso beimposed on any person found guilty of carrying on businessas a limited liability

partnership without its being incorporated as LLP.

Publication of Name and Limited Liability

Each limited liability partnership firm registered under 'The limited Liability Partnership Act2008' is required to publish, underSec 21,

a) its name, address of registered office, registration number, and

b) a statement declaring its registration with limited liability;on all its official correspondence, publications and the invoices

Penalty

Sec 21(2) states if any of the firm is found guilty of non-compliance, it is liable to bepunished with a fine of Rupees two thousand extendable to Rupees twenty five thousand.

5. LLP Agreement

Two or more people join together to do a lawful business under an agreement governed by

the limited liability partnership act 2008. This LLP Agreement guides and governs thepartners with regard to their duties&rights in relation to each other and in relation to the

LLP firm along with the rights and duties of LLP firm, Sec 23(1).

However, the partners or LLP, the body corporate, can incorporate any change in the

agreement if they desire so by registering it. Sec 23(2)provides that any kind of change(s)made in the agreement has to be filed with the registrar in the required manner or form

along with the fee, to make it effective or enforceable.

A written agreement framed before incorporation of Limited Liability Partnership firm,agreed upon by the subscribers for incorporation can make it binding on the partners after

incorporation, provided it is ratified by all the partners after incorporation as per Sec 23(3)

If no agreement is made or an agreement is silent on some issues, the provisions ofSchedule I of LLP Act 2008 shall applySec 23(4)


LLP AgreementClick on the link below to view the agreement form that is filled by the partners to

enter into an LLP under the respective Act. The proforma specifies the partners

names and addresses, specifies the name and other details under which LLP isagreed to be started, profit sharing ratio between partners, agreement related rights

and duties of partners, admission and cessation of partners vetted by two witnesses.

Source:
http://www.ourprofessionalteam.com/index.php?option=com_content&view=article&id=165&catid=119&Itemid=37%20%20http://www.ourprofessionalteam.com/index.php?option=com_content&view=article&id=165&catid=119&Itemid=37%20%20http://www.ourprofessionalteam.com/index.php?option=com_content&view=article&id=165&catid=119&Itemid=37%20%20


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http://www.ourprofessionalteam.com/index.php?option=com_content&view=article&

id=165&catid=119&Itemid=37

6. Partners and Partners' Relations

Anybody, whether an individual or a body corporate can be a partner in an LLP. The figure

below displays various persons who can become the partners in an LLP.

Figure 5: Partners in LLP

Sec 22 defines the eligibility criteria for being a partner to LLP. Anybody whether

anindividual or a body corporatelike company, LLP registered in India, a foreign LLP and a

foreign company, can become a partner of a LLP, if they have subscribed their name(s) tothe incorporation documents, or their names are included according to the provisions of LLPagreement.

However an individual, who is of unsound mind, or an undischarged insolventor has applied

to be declared as an insolvent is not qualified to become the partner of LLP. Such personscannot also enter into a contract under Indian Contract Act 1872.

Cessation of Partnership Interest

Sec 24defines the conditions when the interest of a partner in LLP firm ceases to exist. It

also defines the rights and duties towards the firm even after his/her termination ofpartnership interest.

The partnership interest of an individual in the Limited Liability Partnershipfirm will come to

an end in the following circumstances:1. The partnership interest will cease to exist on the death of an individual partner or if

the LLP firm is dissolvedunder Sec 24(2)(a).


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2. If the individual is declared to be of unsound mind by a competent court underSec24(2)(b).

3. If he is anundischarged insolvent or has applied to be adjudged as an insolvent asprovided inSec 24(2)(c)

4. The partnership interest of an individual may come to an end in the situations andmanner as agreed upon by the partners in the LLP agreement. And in the absence of

any such agreement on the issue the individual may give a notice in writing to otherpartners in LLP firm for at least 30 days Sec 24(1).

However, a notice by a person who ceases to be a partnerhas to be delivered to the

Registrar or to any person dealing with LLP.In the absence of such notice the former partnershall continue to be regarded as partnerSec 24(3).

5. The obligation of a partner to the partnership or to the other partners or to any otherperson does not come to an end just by itself, even when he ceases to be a partner

of a LLP.Sec 24(4)

Sec 24(5)protects the right of interest of the former partner of a LLP firm. Unless stated

otherwise in the LLP agreement, the former partner is entitled to receive his share from theLLP in consequence to his death or insolvency restricted to i) the extent of his contribution

towards capital of LLP and ii) the accumulated profits after the accumulated losses are

deducted till the date his partnership interesthas come to an end.However, under Sec 24(6) the LLP Act categorically states that itdoes not allow or conferany right on the former partner of interference in the management of the LLP firm.

Registration of Changes in Information related to Partners

Any change in the composition of partners or any change in the information related topartners has to be brought to the notice of registrar of Company Affairs to make it

enforceable in the eyes of law.Sec25

1. Each partner has to notify the LLP firm with regard to any change in his name oraddress by a partner to a within fifteen days of such change as provided in Sec25(1).

2.The LLP firm has to file a notice to the Registrar under Sec25(2) of the Act, within thirtydays,

a) of an individual becoming a partner or ceasing to be a partner, and/or

b) of any change in address or name of a partner, who has informed the registrar u/s

25(1).The notice required to be filed u/s 25(2) has to be filed in the prescribed format along withthe required fee. It also needs to be duly signed by the designated partner of the LLP firm

and authenticated in the manner required by lawSec25(3).

Penalty

If the provisions of subsection (2) of Sec 25 are not adhered to then the LLP, and each of its

designated partners are liable to be fined with Two thousand rupees to be extendable torupees twenty five thousand underSec25(4).

And if any partner contravenes the provisions of subsection 1 section 25, may be levied thefine of Rupees of Two thousand rupees to be extendable to rupees twenty five thousandunderSec25(5).

The partner of LLP who ceases to be a partner can also file the notice-referred u/s 25(2), ifhe believes for some reasonable cause that the notification will not be filed by the LLP firm.The Registrar will have the power to get the confirmation from the LLP to this effect; if such

a notice has not already been filed by the LLP firm. If the LLP firm does not provide any


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confirmation to this regard within a period of fifteen days the registrar shall register the

notice underSec25(6), filed by the partner whose partnership relations are ended.

7. Designated Partners

Sec7and subsections1-6 describes the various provisions related to the designatedpartners. The minimum number of designated partners required to start an LLP is two and aminimum of one of them shall be a resident in India.If an LLP has all the partners as bodycorporate then nominees of such body corporate shall act as designated partners.However if

one or more partners are individuals and body corporate at least two individual partners

shall act as designated partners.

Within thirty days of appointment as a designated partner,an LLP shall file with the

Registrar, particulars of every individual who has given his/her consent to act as designatedpartner u/s 7(4).

If the LLP agreement so provides, any partner may cease to be a designated partner inaccordance with the limited liability partnership agreement u/s 7(2)(ii).

Every Designated Partner of LLP has to obtain Designated Partner Identification Number

(DPIN) from the Central Government u/s 7(6).

Value Addition 5: Surf and Learn

Difference between Partner and Designated PartnerClick on the link below to read the differences between a partner and a designated partner

of an LLP.


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Source: http://taxmantra.com/differences-between-a-partner-and-a-designated-partner-in-

llp.html/

Liabilities of Designated partners

Sec8assigns the responsibility of compliance to the provisions on the shoulders of the

designated partner(s), under the LLP Act. And only he, unless stated otherwise in the Act,has to face the penalty for non-compliance.

a) The responsibility foradherence toall formalities, acts and matters, as are statedin the LLP Act shall be of a designated partner. This would also include the

provisionsincluding filing of any document,return or a statement, or a report as

may be specified in the LLP agreement in pursuance to the Act.b) Failure to comply with these provisions will make him liable for all penalties

imposed on limited liability partnership.

Change in Designated Partners

Sec9specifies that the position of designated partner cannot remain vacant for more than

30 days and thus a fresh appointment has to be done.

A designated partner may be appointed within thirty days whenever a vacancy arises for

any reason in a LLP in accordance with the provisions of section 7 subsection (4) and (5).

If no designated partner is appointed, or if at any point of time there is only one

designated partner then each partner shall be deemed to be a designated partner.

Value Addition6: Did You Know?

FAQs about Partners and Designated PartnersClick on the link below to see answers by Ministry of Corporate Affairs, Govt. of India tofrequently asked questions about partners and designated partners in the context of aLimited Liability Partnership.

Source:http://www.mca.gov.in/LLP/partners_faq.html

Penalty

Under Sec10the LLP firm and all its partners are liable to be fined:

a)A sum of Rupees Ten Thousand which may extend to Rupees Five lakhs, if they fail tocomply with the provisions ofSec7 (1),andb) A sum ofRupees Ten Thousand extendable to Rupees One lakh, if the non compliance is

towards the Sec7(4) and (5) and Sec 8,or Sec 9of the LLP Act.

8.Extent ofLiability in an LLP:

Under Sec26 Partner(s) act as Agent

The partner(s) of anLLP firm act as an agent of the LLP for the purpose of business, butnone of these represent or act as agents of other partners.

Extent of liability in LLP

Under Sec27aLLPfirm shall not be bound by the acts of a partner if:
http://taxmantra.com/differences-between-a-partner-and-a-designated-partner-in-llp.html/http://taxmantra.com/differences-between-a-partner-and-a-designated-partner-in-llp.html/http://taxmantra.com/differences-between-a-partner-and-a-designated-partner-in-llp.html/http://www.mca.gov.in/LLP/partners_faq.htmlhttp://www.mca.gov.in/LLP/partners_faq.htmlhttp://www.mca.gov.in/LLP/partners_faq.htmlhttp://www.mca.gov.in/LLP/partners_faq.htmlhttp://taxmantra.com/differences-between-a-partner-and-a-designated-partner-in-llp.html/http://taxmantra.com/differences-between-a-partner-and-a-designated-partner-in-llp.html/


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1. Partner acts without authority of the LLPtoexecute a particular work and theperson dealing with him is aware of the fact thatthe partner has no authority for

the specific work, or2. The person dealing with the partner does not know or believe him to be a partner.

Any wrongful act or omission on the part of a partnerdone within its authority in the

course of business shall make the LLP liable to any person u/s 27(2).However, any obligation of the LLP whether arising due to the contract or otherwise is

solely the obligation of LLP u/s 27(3).

The property of the limited partnership and not of partners shall be used for meeting itsliabilities u/s 27(4).

Extent of Liability of Partner

Sec28clarifies the position towards the extent of liability of a partner. An LLPshall beonly

liable for all obligations of the LLP referred to u/s27(3).A partner, directly or indirectly,cannot be made responsible for any of such acts only for being a partner.He/she does

nothave personal liability.A partner is not also personally liablefor any wrongful act or omission of other partners

but only for his own wrongful acts or omission u/s/28(2).

Extent of Liability in case of FRAUD

But the LLP Act also takes care of an act committed to with the intention of takingadvantage of having limited liability. In that case, the limited liability is converted into

unlimited liability for the partners who are engaged in such act(s), under Sec30.

Penalty which may range fromfifty thousand rupees to five lakh rupees and

imprisonment up to two years may be imposed on every person who is a party to any

act done with an intention to defraud creditors.Such acts would also make the liability

unlimited of limited liability partnership, or any of its partners.

Compensation may be awarded to any person who has incurred any loss or damage as aresult of fraudulent act, while conducting the business or otherwise, committed bylimited liability partnership or any one of its employees or partners or designated

partners.

However if the above-mentioned act has been committed without theknowledge oflimited liability partnership, LLP would not be liable.

Partner by Holding Out

Sec29(1)protecting the rights of the third party states that if any person, who, byspoken or written words or by conduct,represents himself, or willingly permits himself to

be represented as a partner in a LLP firm is liable to any person who has on the faith of

such representation given credit to LLP, whether the representation has reached theperson so giving credit or not.


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Death of partner

If the partner dies and the business is being carried out in the same name as it was

being carried out earlier, the use of that name shall not by itself make his/her legalrepresentative or property liable for the acts done after his demise u/s 29(2).

The law defines the liability of a partner in case the business is carried upon even after

the requirement of minimum number of members is unmet. In other words,if thenumber of partners is reduced below the statutory minimum i.e.twoand a period of sixmonths has elapsed with the business being carried on with that reduced number the

person who is the only partner shall be personally liable for the debts of limited liability

partnership provided he has knowledge of such fact.

Summary:The Limited Liability Partnership Act came into existence in 2009 for the formation of

the professional enterprises such as consultancy firms of CA, CS, Advocates etc.;SMEs and Micro enterprises.The Incorporation of Limited Liability Partnership is covered under Sec 11 of the LLP

Act, 2009. The section describes the necessary conditions that need to be fulfilledby the interested parties for incorporation of an organization as a LLP firm.

Section 12 prescribes that the partners have to comply with the provisions definedunder section 11. Upon compliance of these provisions by the firm, the Registrarshall within fourteen days.


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Section 12 subsection 2 provides that a registrar may accept the statement ofcompliance submitted under Section 11 subsection 1 and clause (c) as a proof that

all the rules, requirements etc. related to incorporation have been adheredcompletely.

The certificate so issued by the registrar, is a conclusive proof of incorporation of aLLP by the name specified in the incorporation documents.

Upon Incorporation, an entry is made in the Register of LLP and a LLP IdentificationNumber (LLPIN) is given to the LLP for further correspondence and reference.Upon registration, an LLP receives certain rights governed by section 14 of the Act.Once limited liability partnership is registered with its registered office, all

correspondence has to be posted or mailed at such registered office.

An LLP may be registered on-line by following the directions provided by the Ministryof Company Affairs.

The names to the limited liability partnership firms are allotted by the Registrar ofthe Company Affairs in accordance with the rules framed by the central

government. Section 15 of the Act relates to the provisions related to name of LLP.

The LLP Agreement guides and governs the partners with regard to their duties &rights in relation to each other and in relation to the LLP firm.

An individual or a body corporate can be a partner in an LLP. Section 22 describesthe eligibility criteria for being a partner to LLP.

A designated partner is nominee of a body corporate that is a partner in LLP.Every partner of an LLP is an agent of the LLP, but not of other partners.A partner is not personally liable for the wrongful act or omission of other partners,

but only for his own wrongful acts or omission. He does not have personal liability.

Any person, who,represents himself,or willingly permits himself to be represented as a partner in aLLP, is liable to any person who has on the faith of such representation given credit

to LLP, whether the representation has reached the person so giving credit or not.

Exercises:A.

Objective Type Questions

1.Fill in the blanks:

1. DPIN stands for _________________2. Incorporation Document shall be signed by at least ___ members3. ____________ shall be the last words of the name of LLP4. Every partner of an LLP for the business of the LLP is____________

of LLP but not of other partners

5. The Certificate of incorporation is a ______________evidence of incorporation6. Appointment of at least ____designated partners is compulsory for all LLPs7. Liability of partners in case of fraud is_____________.8. Any _________or_________ can be a partner of LLP.9. An LLP shall have minimum ______ partners.10.LLPIN stands for ___________.

2.True or False:1. Two or more persons associate to carry on a charitable business.2. A partner is liable for other partners' wrongful act(s) or omission(s).3. Certificate of Incorporation is a conclusive proof of incorporation.4. An LLP shall have minimum 5 and maximum 20 partners.5. Limited liability Act came into force in 2009.6. A partner is not personally liable only by reason of being a partner in LLP.


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7. The liability of LLP shall be met out of the property of LLP.8. Astatement that all requirements of LLP act have been complied with is not to

be filed with the Registrar.

B. Short Questions:1. What are the disqualifications of partner?2. What is LLP Agreement? Is it compulsory for all LLPs?3. How can a person become a partner of an LLP?4. Can an existing partner cease to be a partner of LLP?5. Can a body corporate become a partner of LLP?C. Long Questions:

1. What is an incorporation document? Discuss its contents2. Certificate of Incorporation is a conclusive evidence of registration of a LLP.

Comment.

3. State the legal effects of registration of a limited liability partnership.4. Who is a designated partner? Discuss the main provisions.5. When is a partner personally liable in limited liability partnership?6. What is the procedure for changing the registered office from one place toanother?7. State the provisions of the Act in respect of Names of limited liability

partnership.

(Answers to objective type questions:

Fill in the blanks1.Designated Partner Identification Number

2.Two

3. Limited liability Partnership or LLP

4. Agent5.Conclusive

6.Two7. Unlimited8. Individual, body corporate

9. Two10. Limited Liability Partnership Identification Number

True or False:

1-F; 2-F; 3-T; 4-F; 5-T; 6-T; 7-T; 8. - F.)

Glossary: Agent: An agent is a person who transacts business for others. Cease: It refers to stop or to bring something to an end. Conclusive: It refers to a proof regarding something that is convincing, and leaves

no doubt.

Estoppel: It refers to a legal impediment. Incorporate: In this lesson, it refers to forming into a body corporate through

registration.

Insolvent: It refers to a debtor who is unable to pay off his debts and has becomebankrupt.

Liability: It refers to owing to someone; it may be called an obligation ora debt.


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Subscribe: It refers to expressing ones assent;to sign a legal document. Undischarged: It refers to some duty or liability that has not been discharged, not

carried out or not met.

References:1. Work Cited:

1. R K Chopra(2011):Business Law, Himalaya Publishing House, Mumbai2. G K Kapoor(2012):Business & Industrial Law, Mayur Paperback, New Delhi3. Bare Act on Limited Liability Partnership www.mca.gov.in http://wirc-

icai.org/wirc_referencer/Company%20Law/Formation%20of%20Companies%20LLPs.htm

http://www.advocatekhoj.com/library/bareacts/limited/index.php?Title=Limited%20Liability%20Partnership%20Act,%202008to know more on LLP through the bare act

http://www.caclubindia.com/forum/formation-of-limited-liability-partnership-66484.asp
http://www.caclubindia.com/forum/formation-of-limited-liability-partnership-66484.asphttp://www.caclubindia.com/forum/formation-of-limited-liability-partnership-66484.asphttp://www.caclubindia.com/forum/formation-of-limited-liability-partnership-66484.asphttp://www.caclubindia.com/forum/formation-of-limited-liability-partnership-66484.asphttp://www.caclubindia.com/forum/formation-of-limited-liability-partnership-66484.asphttp://www.caclubindia.com/forum/formation-of-limited-liability-partnership-66484.asp

incorporation of llp

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